ECON1004 : Financial Institution and Market Assessment Answer

Physical Gold

The three main investment options in physical gold are gold bullion, gold coin, and gold jewellery. There is a misconception that gold should be bought only in physical form, but this is true. Investment in gold can be made in companies which mine and refine gold and in gold exchange-traded funds (ETFs) (Treece 2023). This paper aims to provide details about how trading is done in gold.

The investment sector of Australia has numerous strategies and investment types. There are two types of approaches. The first type is short-term and the second type is long-term. Gold trading is similar to stock trading. The basic use of gold is in hedging. The old mechanism was to buy physical gold but now the new mechanism is like contracts for difference(CFDs), ETFs, futures and options. No physical gold is exchanged here. In CFDs, short and long-term investments and no commission payments are available. For trading platforms like eToro which is ASIC regulated can be used. The long term investment, the best option is to invest in ETFs. In Australia, trading in gold can be done 24 hours per day for 5 days per week (Khan 2023). The exposure increases when the gold is purchased in the physical form. Trading in ETFs is similar to trading in stocks. In CFDs, the trader just has to pay’ the enter and exit price, there is a requirement of no upfront funding. Such an option is not in physical purchase. It is easy to trade gold according to time desire which is not the case with physical gold (Bloomberg 2023).

Factors Affecting the Price of Gold

There are various factors which are responsible for affecting the price of gold. Gold experience price fluctuation because of overall global demand, interest rates and the value of US dollars. Viewing the price chart of gold for one past year monthly wise, the gold is trading at its highest phase. The current price of gold on 06 May 2023, 16:53 AEST $2015.94. As compared with the other prices within the frame of one past year, it is at its high time. The lowest it made was $1622.15 on 26 September 2022. The graph is drawn how the price of gold is fluctuating ( Gold Bullion Australia 2023). The reason for such fluctuation is the change in the demand and supply of gold. The domestic price of gold has been increased by 4.1% in 2022-23. People will increase the demand for gold as it is expected that the economy will be affected by a recession soon. This will affect the Austrian economy, the increase in gold price will appreciate the Australian dollar and industries can expand more. The revenue generated by the Australian mining industry will increase due to an increase in the gold price (IBISWorld 2023).

Gold is considered value particularly when the uncertainty rises. Investment in Gold is used as hedging against inflation. The rise in the price of gold will appreciate the Australian dollar. Trading in gold is the safest option and the availability of online trading makes it more easy for investors.

Reference

Bloomberg 2023, Investment in gold: Is gold still considered a safe bet in uncertain economic times? viewed 06 May 2023, https://sponsored.bloomberg.com/article/investing-in-gold-is-gold-still-considered-a-safe-bet-in-uncertain-economic-times-

Gold Bullion Australia 2023, Gold, Silver & Platinum live prices, viewed 06 May 2023, https://www.goldbullionaustralia.com.au/live-charts-prices/?gclid=Cj0KCQjw0tKiBhC6ARIsAAOXutnJMPB-_8pgzYuSfwRh1m_Qxd1M_UuOoFmC8N8Hj_RWgSDkwQG-0nEaAtOJEALw_wcB

IBISWorld 2023, Domestic price of gold, viewed 06 May 2023, https://www.ibisworld.com/au/bed/domestic-price-of-gold/25049/

Khan, W 2023, Gold trading Australia: the complete guide for beginners, viewed 06 May 2023, https://trading-education.com/gold-trading-australia-the-complete-guide-for-beginners#h_23872222811605277582783

Treece, D D 2023, How to invest in gold, viewed 06 May 2023, https://www.forbes.com/advisor/investing/how-to-invest-in-gold/

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