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A Simple guide for new Investors to the surge in Gold prices from freemexy's blog

A Simple guide for new Investors to the surge in Gold prices

Gold prices hit a record at the end of last week, creating a new milestone in a surge that began in late 2018 and has gathered momentum during the coronavirus pandemic.To get more news about WikiFX, you can visit wikifx news official website.
  Gold soared roughly 30% in 2020 to stop just short of closing at $2,000 a troy ounce—which is an all-time high in New York trading as it surpassed the Nasdaq Composite Index of highflying technology stocks.
  What is the gold market?
  There are two gold markets, remarkably similar because investment banks and other big players are active in both.
  The first is the physical market, which brings together miners, refiners, jewellers, central banks, electronics manufacturers, banks and investors.
  London is the focal point, dating back to the first gold rush from Brazil in 1697. Shanghai, Zurich, Dubai and Hong Kong are also hubs.


In good times, gold costs roughly the same amount in London‘s physical market and on New York’s Comex.
  If prices move out of kilter, banks bring them back in line by buying bullion on the cheap in one city, flying it across the Atlantic (normally in the cargo hold of a passenger plane) and selling at a profit where prices are higher.
  They must factor in the small sum it costs to recast the gold, since Comex requires smaller bars, weighing either 100 troy ounces or a kilo.
  The Corona virus pandemic scrambled this self-correcting mechanism in March this year. The world is still reeling from the effects.
  Flights not operating due to the pandemic led to fears of a shortage in New York, sending futures well above spot prices in London.
  The concerns proved unfounded, but the violent price moves led to losses at banks including HSBC Holdings PLC.
  That has prompted banks to trade less actively on the Comex, which could make futures more volatile going forward.
  How do Investors buy and sell gold?
  Professional fund managers bet on gold prices with futures.
  To avoid taking hold of a large amount of bullion, investors normally sell futures before they expire and buy later-dated contracts, a process known as rolling.
  This comes at a cost because longer-dated futures cost more than spot gold.
  The difference normally goes to the pockets of the investors enemy — investment bankers—who gets to buy at the low prices and sell at high prices.
  Regular investors, comprising of Parents, Everyday people buy physical bars and coins, which they can either keep at home or in vaults.
  Demand for bars and coins has shot up during the pandemic, though clients are also selling to profit on rising prices.
  When things go bonkers and out of hand, with a lot of uncertainty in the markets, the two precious metal all investors rush to are gold and silver. A lot of investors consider it a safe haven investment.
  Investors who want exposure to gold prices without the hassle of storing bullion or trading futures found an alternate solution in 2003: exchange-traded funds (ETFs).
  These funds, with a huge surge in popularity, buy gold and issue shares that trade on the stock exchange.


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By freemexy
Added Aug 8

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