What is the Gold Price? | Definition, History, and Example


The gold price refers to the value of gold determined through the London Gold Fixing, a daily conference call involving five prominent bullion trading firms in the London bullion market. This established benchmark facilitates global gold trading by providing a standardized reference point for transactions.

Gold price in a nutshell

  • The gold price is determined daily through the London Gold Fixing, involving five bullion trading firms.
  • Gold holds historical significance as a medium of exchange and continues to influence currency valuation.
  • Various factors, including supply, demand dynamics, and speculative demand, influence gold prices.

Understanding the significance of gold prices in trading

In today’s financial markets, trading commodities is gaining momentum as traders seek profitable investment opportunities. Among these commodities, gold stands out as a lucrative option capable of yielding significant returns. Its enduring value and potential as an investment asset make it a desirable choice for traders worldwide.

Gold holds a central position in human history as a highly valued medium of exchange. Even in modern times, it continues to serve as a benchmark for currency valuation in specific regions and countries. Internationally, various gold standards dictate the purchasing power of currencies, underscoring the enduring importance of gold in global economics.

History of gold as a medium of exchange

The establishment of gold standards resulted from the determination of many European countries in the latter part of the 19th century. However, with the financial crisis following World War I, these gold standards got temporarily suspended. It came back again after World War II when the Bretton Woods system fixed the rate of gold at $35 per troy ounce. 

This practice continued until the 1971 Nixon Shock. The United States of America suspended the conversion of USD to gold. The step brought the popularity of the Fiat currency system. 

Gold has never held a stable price for long. Since establishing the international exchange system, gold has only increased its price. For example, in 1970, per troy ounce of gold was equivalent to $37. In 2003, it was equal to $273. With the onset of 2010, gold prices rose to 1410 dollars per ounce.

Factors affecting gold prices

The price of gold is intricately influenced by a multitude of factors, making it a unique commodity in the market. Unlike most other commodities which primarily respond to consumption patterns, gold’s value is profoundly impacted by both supply and demand dynamics, with speculative demand playing a pivotal role.

Central to the fluctuation of gold prices are international institutions, particularly central banks and the International Monetary Fund (IMF). Their policies and actions, such as gold purchases or sales, wield considerable influence over the market. Additionally, the quantity of gold held in official reserves by these institutions serves as a significant determinant of gold prices, reflecting both economic stability and global confidence in the precious metal. Understanding these multifaceted factors is essential for comprehending the dynamics driving gold’s value in the global economy.

Significance of holding gold as a financial asset

Traders trade various precious metals to use them as a hedge against various economic conditions. Gold, for example, is a perfect hedge against inflation or deflation. Traders also use it for hedging currency devaluation. The greatest advantage of holding old is that it has zero risk. History has it; gold always rises in value rather than goes down. Thus, traders consider holding gold as a very beneficial profit-earning decision.

How to trade the Gold Price with Binary Options?

Trading the Gold Price with Binary Options offers potential profit opportunities for traders. Here’s your comprehensive guide to mastering this financial arena:

1. Find a Reliable Binary Options Broker

Choosing a trustworthy broker is essential. Look for a reputable platform that offers Binary Options trading alongside other financial instruments, including gold. Here are three highly-rated Binary Options Brokers:

Broker:
Review:
Advantages:
The offer:
Yield: 97%+
12345
5.0/5
  • Welcomes international clients
  • Offers high payouts: 90% – 97%+
  • Professional-grade trading platform
  • Swift deposit process
  • Enables Social Trading
  • Provides free bonus incentives

$ 5

   Visit broker

(Risk warning: Trading is risky)

Yield: 95%+
12345
5.0/5
  • Min. deposit $10
  • $10,000 demo
  • Professional platform
  • High profit up to 95%
  • Fast withdrawals
  • Signals

$10

   Visit broker

(Risk warning: Trading is risky)

Yield: Up to 100%
12345
5/5
  • $10 minimum deposit
  • Free demo account
  • High return up to 100% (in case of a correct prediction)
  • The platform is easy to use
  • 24/7 support

$10

   Visit broker

(Risk warning: Trading is risky)

Broker:
5.0/5
12345
Yield: 97%+
Advantages:
  • Welcomes international clients
  • Offers high payouts: 90% – 97%+
  • Professional-grade trading platform
  • Swift deposit process
  • Enables Social Trading
  • Provides free bonus incentives
The offer:

$ 5

Visit broker

(Risk warning: Trading is risky)

Broker:
5.0/5
12345
Yield: 95%+
Advantages:
  • Min. deposit $10
  • $10,000 demo
  • Professional platform
  • High profit up to 95%
  • Fast withdrawals
  • Signals
The offer:

$10

Visit broker

(Risk warning: Trading is risky)

Broker:
5/5
12345
Yield: Up to 100%
Advantages:
  • $10 minimum deposit
  • Free demo account
  • High return up to 100% (in case of a correct prediction)
  • The platform is easy to use
  • 24/7 support
The offer:

$10

Visit broker

(Risk warning: Trading is risky)

These brokers prioritize safety, provide attractive returns, and have a global presence. Additionally, they offer free binary demo accounts for risk-free trading, allowing you to practice trading gold Binary Options before committing real funds.

2. Open your trading account

After selecting a broker, register for a trading account. Provide necessary personal information, create a secure login, and complete identity verification as per regulatory standards. Some brokers offer social media sign-up options for added convenience.

3. Fund your account or practice with a demo

Consider using a demo account to practice trading gold Binary Options without risking real money. Familiarize yourself with the platform’s functionalities, test different strategies, and gain confidence. Later, deposit funds securely into your trading account to start trading.

When depositing funds, ensure to choose a payment method supported by the broker, such as bank transfer, credit/debit card, or e-wallet. Be mindful of any deposit fees and minimum deposit requirements set by the broker.

4. Select the gold asset

Binary Options allow traders to speculate on the price movements of various assets, including gold. Choose gold as the underlying asset for your Binary Options trade.

Before selecting the gold asset, analyze market trends, news, and economic indicators that may influence the price of gold. Consider factors such as geopolitical tensions, inflation rates, and central bank policies to make informed trading decisions.

5. Develop a trading strategy

Craft a trading strategy based on your analysis of the gold price movements. Decide whether you predict the price to rise (Call option) or fall (Put option) within a specific time frame. Use technical indicators like moving averages, RSI, stochastic oscillators, and Bollinger Bands to assist in your analysis.

Additionally, consider fundamental analysis factors such as supply and demand dynamics, gold production trends, and macroeconomic factors affecting the global economy.

6. Choose the expiry time

Binary Options contracts come with predefined expiry times. Short-term traders may prefer shorter expiry times, such as 60 seconds or 5 minutes, to capitalize on immediate price movements. Long-term traders may opt for longer expiry times, ranging from several hours to a day or more, to capture broader market trends.

7. Determine your investment amount

Decide the amount you’re comfortable investing in the trade, considering broker account limits. Manage your risk by aligning your investment amount with your risk tolerance.

Ensure to practice proper risk management techniques, such as diversification and position sizing, to protect your capital and maximize potential returns.

8. Execute the trade and monitor

Initiate the trade by selecting either “Call” (Higher) or “Put” (Lower) based on your forecast. Monitor the trade until expiry, and consider utilizing early closure options if available.

If your prediction is correct, enjoy a payout ranging from 75% to 95% of your investment, depending on the broker and gold price movement.

We have successfully executed a trade on the price of gold. A Put Option (Lower) was initiated, with an investment amount of $25, an expiry time of 15 seconds, and an impressive payout rate of 86%, resulting in a substantial profit of $21.50.

Conclusion

Investing in precious metals might prove profitable for a trader. The gold market is highly volatile and offers great scope for speculation to traders. There are many precious metals in the trading world. However, nothing beats the effectiveness and safety that comes with gold trading.

About the author

Percival Knight
Percival Knight is an experienced Binary Options trader for more than ten years. Mainly, he trades 60-second trades at a very high hit rate. My favorite strategies is by using candlesticks and fake-breakouts

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