Gold Futures Trading Can Make You Rich in 2010!
The price of gold is linked to economic activity. Most of the world's supply of gold is in the hands of Central Banks whose primary job is to fight inflation. Central Bank managers know that speculators see the rising price of gold as a sign of inflation. So when the rallies in gold market tend to go out of hand, central banks start to sell gold from their huge stockpiles and gold prices eventually start to fall.
This is precisely what happened when gold prices breached the historical barrier of $1, 200 per ounce. However, this fact that central banks tend to be sellers of gold during rallies in the gold market doesn't mean that gold prices cannot rally for a significant period of time. What this means is that the days of straight up advances in gold prices though likely aren't as likely as they once were. Bottom line gold is a tricky market.
South Africa is the world's largest producer of gold accounting for 25% of the global gold production followed by Russia, United States, Canada, Australia and Brazil. Two major influences on the gold prices are the major political upheavals. Political crisis tends to be a major reason for the increase in gold prices.
The second is the influence of inflation. In times of high inflation, wealthy investors tend to flee to the gold as a safe haven asset. However, this influence has been reduced due to the management of gold prices by the central banks. Now gold prices and USD tend to move in opposite direction. This negative correlation isn't perfect but tends to hold over longer periods of time.
There are many exchanges in the world where gold gets traded. The most popular is the New York Mercantile Exchange (NYMEX). The second most popular is the Chicago Board Of Trade (CBOT). GOld futures on CBOT have relatively low margin requirements. This makes trading gold futures highly attractive for retail traders. The international benchmark for gold is the London Price Fix. London Price Fix is quoted in troy ouncestwice daily known as A.M Fix and the P.M Fix and is set in US Dollar.
Now, good news is that mini gold futures contracts also get traded on CBOT. These mini gold futures contracts hold 33.2 troy ounces per contract as compared to 100 troy ounces per contract. Mini gold futures contracts have lower margin requirements as compared to the regular contracts. Now this is the best time to trade gold futures. You can combine gold trading with currency trading. Both hedge each other and can be highly lucrative.
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