To know how to benefit the fluctuation of gold prices we need to start with the reason why the gold prices fluctuate.
Why the gold prices fluctuate
The reason behind the fluctuation of gold prices is the cost involved in it. The exploration and the development are the main to costs involved. But if we subdivide the cost then it will show that the cost of manpower, instruments, equipment, studies and metallurgical tests are also involved directly. To acquire gold we need to follow the procedure of gold mining which can only be done with the help of specialised technology and method. Gold prices fluctuation is mostly affected by the various factors which are not in the circle of control for the gold companies.
Factors involved for the fluctuation
The market expert says that “Do not buy gold, invest on gold”. To invest on gold, you need to know when the right time to buy gold is. You must buy gold when you know that the prices are going to be high and sell gold when the prices are going to fall. How will you predict this right timing of buying and selling gold? You can easily predict this if you know what are factors involved in the fluctuation of gold prices. The following are the major factors responsible in the price fluctuation:
- Currency Status: This is noticed that some currencies like Aus dollar,Euro are pretty volatile in nature. The fluctuation in price of these dollars against US dollars causes the fluctuation in gold prices. So, as an investor you need to be aware of this market scenario. This is inversely proportionate, that means when the value of the currencies depreciates, gold price rises.
- Decisions taken by CME: Just few days ago, CME decided to increase the margin in case of gold and silver which has resulted the instant price fall of these two metals. So, it is in the circle of control for the CME. They will be able to control the situation as and when it gold prices are down wards.
- European debt crisis: Crisis in the European debt market is highly affecting the gold prices. If it is going to go downhill, then the gold prices will be low due to the lower demand in the market. In European country, the banks which are running short of liquid fund they sell of their gold reserved. By doing this, they are ensuring the more supply to the market.
- US economy: US economy status is also directly connected with the gold prices. This has got two reason, one is US is a very good consumer for gold. The other option is if the US slows down, it has an effect on other economy and their capacity to buy gold. This simply signifies that the gold prices will fall as when the US economy becomes slow.
What to avoid when buying gold
Buying gold or investing gold has been the dual benefited investment option. We all have a myth regarding buying gold i.e. buy some glittering gold coins in some auspicious occasion and keep them into your locker. This is a very wrong idea to buy or invest in gold. In an unfortunate scenario, people with the thought process of buying gold coins, buy the coins with mental blockage and end up looking money. Now we need to know the 10 suggested ways to avoid your own loss:
- Lack of Knowledge
- Misunderstanding of the gold value
- Indecisiveness about the invested amount
- High Expectation in short time
- Relating stock market and gold market
- Replacing Gold stocks and ETF’s
- In favour of billion, not buying the Certified Gold.
- Economical rate of buying gold
- Dealing with multiple dealers
- Understanding issue
First you need to gather all possible information regarding gold investment then only you will be able to take some wise decision in terms of investment in gold. We have already discussed some of the points which need to be taken care of while investing in gold.