Of all the precious metals, gold is the most popular, as an investment or speculation.Investors generally buy gold as a hedge or safe haven against any economic, political, social, or fiat currency crises (including investment stock market declines, increasing national debt, currency failure, inflation, and social unrest, war).
The gold market is subject to speculation as other commodities are, especially through the use of futures contracts and derivatives. The history of the gold standard, the role of gold reserves in central banking, gold’s low correlation with other commodity prices, and its pricing in relation to fiat currencies during the financial crisis of 2007–2010, suggest that gold has features of being money, although nice in principle would be impossible to implement.
Trading Gold can be a very lucrative way of speculating in the financial markets however, we urge caution. It is a highly volatile commodity and spreads are larger than Forex trades. Gold has seen unprecedented all time highs but is not so attractive in recent months. Gold was always the measure of the USD and pre Forex markets, was pegged at $35 per Oz. Since the Free Forex trading of global currencies gold is currently back around the $1250 mark from its $1994.00 highs of 2010.
It was always considered a “safe haven” when traders are concerned about the “stock markets” or the USD is showing global weakness, or some phenomenon happens around the world, Gold always traded up, until recently.
Gold has been used throughout history as money and has been a relative standard for currency equivalents specific to economic regions or countries. Many European countries implemented gold standards in the later part of the 19th century until these were dismantled in the financial crises involving World War I. After World War II, the Bretton Woods system pegged the United States dollar to gold at a rate of US$35 per troy ounce. The system existed until the 1971 Nixon Shock, when the US unilaterally suspended the direct convertibility of the United States dollar to gold and made the transition to a fiat currency system. The last currency to be divorced from gold was the Swiss Franc in 2000.
Since 1919 the most common benchmark for the price of gold has been the London gold fixing, a twice-daily telephone meeting of representatives from five Bullion trading firms of the London bullion market. Furthermore, gold is traded continuously throughout the world based on the intra-day spot price, derived from over-the-counter gold-trading markets around the world.
Economies that produce large amounts of Gold, such as Australia can benefit when Gold performs well.