Gold Down More than 10%
Gold prices fell yet again over the last full week of November, pushing them down now six weeks in a row. Gold prices have now dropped about 10 percent off of their high, and as speculation about the Fed raising interest rates continues, more and more people are moving away from investing in gold, and putting it in other places, mainly the U.S. dollar.
Cash and gold have had an interesting give and take over the last several decades. As one goes up, the other tends to go down. In the middle of all of this is the U.S. stock market, which has seen its share of fluctuation over the last six weeks as well. Understanding the dynamic that these three have is a good way to understand the economy better, and it can help make you a better short term trader, too. This is especially true of binary options traders that are able to appropriately time their trades and take advantage of the distinct price trends that are being created because of this give and take.
Gold now stands at just over $1,056 per ounce, which is more than $120 off of where it stood not too long ago. Last week alone, the price per ounce fell by 1.26 percent—just on Friday. This, experts agree, is clearly a sign of consumer confidence, but not a sign of their confidence in gold. Rather, consumers are concerned about what rising interest rates will do to businesses, and to the dollar in return. As experts watch this occur, it’s becoming apparent that gold is no longer considered the best place to have your money and because of the impact that a raised interest rate could have on business, the U.S. dollar is.
It’s a strategy that is used primarily as a hedge, but even some of the most expert analysts have agreed that a tiny portion of gold in your portfolio, say no more than 2 to 5 percent, can save you from a year of losses. When gold does well, it can do really well. This is exemplified by gold’s meteoric rise in price. In 1975, gold average a price of around $161 per ounce. Today, even after a 10 percent dip in price, it costs more than $1,050. That’s a huge increase in just 40 years, and much of that has come since the year 2000. In other words, gold has a huge bull trend, and this dip is likely going to be a short lived one.
But, as you know, even a short lived dip can be catastrophic to traders. And that’s why strategies like put binary options are becoming a strong tool for those that are trying to offset losses right now. Gold is dropping in price because people believe that it is no longer a safe holding tool, so they are converting gold to cash. As this happens, gold’s price per ounce drops, and the USD goes up in strength against most competing currencies (depending on what’s happening in the respective economies). When stocks drop, the dollar gets stronger, and this is exactly what people are trying to take advantage of. If you are unfamiliar with the stock market and currency trading, you can still profit simply because you understand how gold works. It’s a great long term investment (as shown by historical examples above), but in the short term, it can fluctuate, especially in a changing economy. That’s what is happening in the U.S. right now, and as others move to protect themselves, you can still profit off of gold by using binary options to create big rates of return off of the gradual decline currently underway.