Not too long ago, anything related to finance was almost strictly a realm of the wealthy: banks and large financial institutions dominated the financial world, and even the wealthy could invest in stocks or currencies, but anything related to fiscal responsibility or ordinary people involved in investing or trading was left to the Professionals.
Since the mid 1990’s, however, many people have noticed there is a vast missing link in the financial world: the currency trading market. Nowadays, anyone can participate in the web marketplace and buy and sell currencies just as easily as any other product is bought or sold on a retail store store shelves. The difference is, the currency traders are looking at all of the same data that affects the value of stocks, bonds, and commodities: all the technical and fundamental analysis that is necessary to make informed decisions on currency movements.
Since thegoldmarket was established in 1860, for instance,began allowing individual investors to participate in 18 months of restricted access. In the next 25 years of restricted access the market grew to Lets say some $2 trillion in transactions, and by 2012 it was upwards of $4 trillion.
Thegoldmarket is different in many ways from other markets. The gold market is one of the oldest and – perhaps – the most liquid of all the markets. Gold prices are constantly fluctuation and always will be. There is always a demand for gold; thus the supply. The same goes for silver; the supply is always high and always will be. Unlike stock markets, the gold market is not backed by a downturn in the economy, and its participants can respond to economic crisis or trends.
What’s more, one of the interesting things about the gold market is that it is a 24 hour market. If you invested in gold you could trade Monday to Friday, Gold is high risk, high reward.
The gold market started slowly and with some arguments surrounding the virtues of gold – unlike paper – the gold market started slowly.
Gold is a precious metal that has a heavy demand for refining. Therefore its price is highly volatile, with the price changing many times per day.
Each micro German mark is equivalent to 10 micro 1970 US dollars., each company one silver mine has about 5000 tons of gold waiting to be mine. That’s a lot of gold.
And the supply is limited and difficult to increase, thus the gold price is on the rise.
Since gold is closely tied to economic growth in a country and the belief that the US economy is going through one of the worst blips in history, this huge demand is putting pressure on the gold price.
For many years governments have followed an agreed upon rule that they should international currencies pegged to the gold price. This way the country’s central bank can manage the country’s currency against the US dollar.
Currently the US dollar is still intact as a currency but many countries have already disaster in place in the form of trade deficit which has uphill aforex bloom like many US citizens (and others) are plain fed-up with having to pay for rising and protecting inflation.
Nick Beecroft in theFinancial Times talked about the difficulty for governments of getting their heads around the reality that there is a trade deficit.
He talked about how much damage thetrade deficit does to an economy and how politicians have to get over it if they are to get any momentum.
As Beecroft understands, there is a global inverse relationship between a trade deficit and inflation.
The bigger the deficit is on a per capita basis, the weaker the currency is.
politicians have to get over this or the economy will continue to be weak, impacting on the exchange rate between currencies.
As Beecroft talked about, inflation reduces the purchasing power of a currency which impacts the exchange rate.
There are already many players in theforex market predicting that the days are over of relying on the Watch The Exchange (bot) and its trends.
In Beecroft’s opinion, there is a commercial crisis of sorts that is starting which leaves the future in the hands of the most sophisticated players.
As Beecroft stated, there are two outcomes that could happen with this market, namely
- Either theequipped fund managers can realize their mistakes with the benefit of hindsight, i.e. they could know what to do to prevent the events of 2009.
- Otherwise, the downturn in the financial markets couldominated in huge amounts of weakness in the forex markets, forcing correction in forex rates and leading to a return to real values.
Not a good position to be in!
Well, Beecroft is clearly in the right place at the right time.
He correctly recognized that the financial crisis had not delivered the bulls to the upside as he had first thought and with the stock market in free fall.
