Gold: no longer the safety net?
In the long run the outlook for gold remains uncertain. Although in theory the decrease in the price of the precious metal shows an improvement in the global economy, it is still heavily affected by the inflationary policies introduced by the Federal Reserve, European Central Bank and Bank of England.
Gold had been seen as a pretty safe bet for investors during the recent turmoil in the global economy. Yet after a decade long rally, gold experienced its biggest fall in value for 30 years in April and again this week tumbling to its lowest level in nearly three years, sparked by the Federal Reserve setting out a time frame for the US central bank to exit its stimulus programme, as well as the threat of heavily indebted Eurozone countries selling their gold reserves.
The continued uncertainty has created significant volatility in the price of gold. Saxo Capital Markets UK has said that during the same period in 2012 there has been a 288% increase in the amount of gold trades being placed by its subscribers.
Ole Hansen, Head of Commodity Strategy, observed that: “Volatility in gold options has picked up over the past week. Investors are still nervous about the potential for further losses. This is demonstrated by the fact that put volatility is higher and a majority of the top 10 most-traded strikes are puts.”
However, the data shows that most investors are still using gold as a safety net when trading currencies. There has been an eight fold increase in the number of FX gold trades being placed in 2013 compared to 2012, with 99% of those trades against the US Dollar.
In the long run the outlook for gold remains uncertain. Although in theory the decrease in the price of the precious metal shows an improvement in the global economy, it is still heavily affected by the inflationary policies introduced by the Federal Reserve, European Central Bank and Bank of England. The push and pull effect of equity markets against currency trading and general uncertainty over the economic outlook has created a fluid market for gold.
Sumber : Google
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