Gold is one of the most highly sought-after metals. It is renowned for its intrinsic value and allure as a safe-haven asset. It also symbolizes wealth and stability, making it a popular and timeless investment choice for both traders and central banks worldwide.
As a significant player in financial markets, the price of gold is influenced by several critical factors. In this article, we will explore the three key factors that have a profound impact on gold prices. By understanding these driving forces behind the precious metal’s market dynamics, traders can gain valuable insights into trading gold futures.
Trading Gold Futures
Being one of the valuable metals in the world, Gold is also traded in the futures market. There are many different gold futures trading contracts across the different exchanges. This ranges from Gold Perpetual Futures Contract to Micro Gold futures and E-mini Gold futures.
Traders can look to invest in gold futures through Orient Futures Singapore. Here are the different exchanges and the gold futures contracts that they offer:
APEX Gold Futures
The Asia Pacific Exchange (APEX) offers Gold Perpetual Futures Contract that traders can trade through Orient Future Singapore.
Orient Futures International Singapore currently hold membership to APEX, which would make trading Gold Futures more accessible.
COMEX Gold Futures
The New York Mercantile Exchange Comex Division (COMEX) offers Gold Futures, Gold TAS Futures, E-mini Gold Futures, and Micro Gold Futures.
Comex Gold Futures Symbol: GC
DGCX Gold Futures
The Dubai Gold and Commodities Exchange (DGCX) offers Gold Futures and India Gold Quanto Futures.
DGCX Gold Futures Symbol: DG
The India Gold Quanto Futures is a futures contract that derives its value from the price of gold but is settled in Indian Rupees (INR). This unique feature enables traders to participate in speculating on the price of gold without being impacted by exchange rate fluctuations between the Indian Rupee and the US Dollar (USD).
JPX Gold Futures
The Osaka Exchange Incorporated (JPX) offers Gold Standard Futures and Gold Mini Futures.
TFEX Gold Futures
The Thailand Futures Exchange (TFEX) offers 10 Baht Gold Futures, 50 Baht Gold Futures and Gold Online Futures.
3 Factors that affect Gold Prices
1. Federal Reserve Policies and Interest Rates
The Federal Reserve, the central bank of the United States, wields significant influence over gold prices. They do this through its monetary policies and decisions on interest rates. Changes in interest rates can affect the opportunity cost of holding gold. This is due to higher interest rates may prompt investors to favour interest-bearing assets over non-yielding gold. Additionally, the Fed’s stance on economic conditions and inflation expectations can influence demand for gold as a hedge against inflation or economic uncertainties.
According to NBC News, the Federal Reserve (FED) held a meeting on 25th July. They made an announcement stating that it had increased its key interest rate by 0.25% to reach a level of up to 5.5%. This rate hike represents the highest level in 22 years and comes as the FED continues its efforts to combat persistent inflation in the U.S. economy.
The Federal Reserve’s decision to raise interest rates can have a significant impact on gold prices. Generally, when the Fed raises interest rates, it makes borrowing more expensive. This can lead to reduced consumer spending and investment. As a result, the overall economic activity may slow down, and investors might seek safer assets like gold as a hedge against market uncertainties.
2. US Dollar Strength and Currency Fluctuations
Since gold is measured in US dollar, the strength of the US dollar directly affects the price of gold. However, Gold and the US dollar also share an inverse relationship.
While a higher interest rate can strengthen the US dollar, the increased price of gold in US dollars makes it more expensive for investors in other currencies. Consequently, this could potentially lead to a decrease in demand for gold. This might then result in a price decrease to address the lack of demand. Conversely, a weaker dollar can boost global demand for gold, raising its prices.
Currency fluctuations and exchange rate movements also impact gold’s appeal for international investors, particularly during times of currency devaluation or uncertainty.
According to Orient Futures Weekly Data Report on Precious Metals dated 23072023, the 10-year US Treasury yield closed at 3.83%, with inflation expectations at 2.35%, and real interest rates dropping to 1.49%. The US dollar index rebounded by 1.16% to 101.1, and the S&P 500 index rose by 0.69%. The offshore Chinese yuan fell by 0.41%, while Shanghai gold maintained a premium.
3. Demand and Supply of Gold
The fundamental principles of demand and supply play a vital role in determining gold prices. The more demand outweighs the supply, the higher the price of gold.
Demand for gold is driven by various factors. This includes investor sentiment, geopolitical tensions, and economic uncertainties. Geopolitical conflicts and global economic downturns often spark a flight to safety, driving up gold demand. On the supply side, gold mining and production levels, as well as central bank gold reserves and recycling, influence the overall availability of gold in the market.
Orient Futures Weekly Data Report on Precious Metals dated 23072023 reported that the US economic data of demand of gold has been mixed. Retail sales in June raised by 0.2%, but still falling short of the expected 0.5%, and the previous figure revised upward from 0.3% to 0.5%.
Gold Market News
Gold Price Today
According to Orient Futures Weekly Data Report on Precious Metals dated 23072023, London gold rose by 0.3% to $1962 per ounce.
The upward momentum of gold futures prices has slowed down due to the stabilizing US Treasury yield and the rebound in the US dollar index. Market participants are awaiting the outcome of the Federal Reserve’s interest rate meeting in July and gradually entering a wait-and-see state.
Trading Economics reported that Gold prices rose above $1920 an ounce on 11th September 2023.
Future of Gold Prices
The price of gold futures is expected to oscillate around $1950 per ounce in the short term. It is waiting for the outcome of the Federal Reserve’s interest rate meeting. In addition, the central bank’s increased control over the Chinese yuan is unlikely to reverse the trend of its weakness, benefiting domestic gold prices.
Start Trading with Orient Futures Singapore
Being an Overseas Intermediary of Shanghai International Energy Exchange (INE), Dalian Commodity Exchange (DCE), and Zhengzhou Commodity Exchange (ZCE), when foreign clients participate in internationalised futures contracts in these Chinese markets with us, they have direct access to trading, clearing, and settlement. Our parent company, Shanghai Orient Futures, is the largest broker in terms of aggregated volume across the five regulated exchanges in China.
Orient Futures Singapore also currently holds memberships at the Singapore Exchange (SGX), Asia Pacific Exchange (APEX), and ICE Futures Singapore (ICE SG). Starting August 2023, corporate clients can also gain access to the B3 Exchange through us.
We provide bespoke services to our professional clients, tailored to their corporate and individual needs. Our team will be there for you 24 hours on trading days to provide a one-stop portal for all your trades, with simple processes and an intuitive user interface that has low or near-to-zero latency.
