What Market Fundamentals Can Affect the Gold Futures?

In addition to gold’s aesthetic appeal and use in jewelry, gold has numerous practical uses due to its inert nature and malleability. Therefore, gold is both a commodity and a store of value. When you are considering a trade in the gold market some of the basic fundamentals that you should consider are:

1. Supply The credit crisis should continue to affect both exploration activity and potential mine expansion, especially among marginal producers. The round of selling by hedge funds that were forced to sell gold to raise cash to fund significant redemption in other financial investments is tapering off.

2. Demand Retail investment demand for gold in Q3 2008 rose 121%. The biggest surge in demand was in Switzerland, Germany, India and the US. The increased demand coincided with a fall in gold prices and increased economic uncertainty. If Governments around the globe are successful in jump-starting world economic growth this should result in higher commodity prices in general and higher prices for metals, both industrial and precious.

3. Dollar Weakness There seems to be a growing belief in Washington that the only way to deal with both the recession and asset deflation is by creating huge amounts of liquidity. The government is doing this by printing more money, and increasing deficit spending. This should inevitably weaken the value of the US dollar.

A weak dollar encourages U.S. investors to turn to gold because the metal is known for holding its value. It also encourages foreign investors to buy the dollar-denominated metal, because the cost is not as high for those with stronger currencies.

These are just some of the basic fundamentals to keep in mind when you are considering a trade in the gold market. Therefore, before opening up a commodity account to trade gold you should consult with a licensed commodity broker that follows the gold market to discuss investment strategies.

Commodity trading is not suitable for everyone. Substantial risk is involved.

FGI Trading Group, Inc.
Alexander Ramey
Senior Broker
(877) 880-8490
http://www.trademetalfutures.com

Author: Alex Ramey
Article Source: EzineArticles.com
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