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Gold Futures: What Influences Gold Prices?

Gold Futures Fundamentals

Gold is by far the most popular precious metal traded on the market. Used as a mode of exchange for over 2,000 years, gold is still considered a valuable asset and is arguably the most-watched commodity worldwide.

Gold futures deliver a convenient & cost-effective way to participate in this robust market.

COMEX Gold Contracts

Operated by the CME Group, COMEX is the primary global futures exchange for metals including gold, silver copper & aluminum. COMEX offers 2 different contracts for futures traders to participate in the gold market:

  • Gold Futures (GC) is the world’s leading benchmark gold futures contract offering consistent high liquidity to traders & investors.
  • Micro Gold Futures (MGC) deliver a smaller contract size for active traders looking to participate in the physical gold market with less financial commitment.

Fundamental Factors Which Can Impact Gold Prices

Widely viewed across the world as a safe-haven asset, gold futures are considered critically important for portfolio diversification.

Gold prices can be influenced by a number of factors. With a good understanding of volatility and market dynamics, traders can be better prepared to take advantage of potential opportunities in gold futures markets.

  • World Events including elections and financial crises can create financial uncertainty which can influence the price of gold.
  • Federal Open Markets Committee (FOMC) Meetings, held 8 times per year, are when key interest rate and US monetary policy announcements are made. The gold market tends to climb when interest rates are cut and decline when rates are increased.
  • Non-farm Payroll Reports are published once a month and indicate how many aggregate jobs the US economy has added or lost in the last month. This figure is a key factor in Fed policy changes, as job increases imply economic growth.
  • The US Dollar Index is a weighted average of the dollar’s value relative to a based of foreign currencies. Generally, as the US dollar increases relative to other currencies, the price of gold in USD tends to fall.
  • Quarterly GDP Estimates measure the value of goods and services produced in a country and indicate overall economic activity.
  • Central Bank Monetary Policy Announcements can directly impact interest rates, which are generally indirectly correlated with the gold market.
  • The Consumer Price Index (CPI) is a measure of inflation and cost-of-living changes and is often considered in Fed policy decisions.
  • The Producer Price Index (PPI), released once per month, assesses prices at the wholesale level and can indicate trends within commodities markets.

Gold Chart
The chart above displays price action in Gold Futures (GC) over the last 15 years.

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