Gold price trading chart
The LBMA fixes the price of gold by matching gold buyers and gold sellers until the market clears. These gold prices are considered the benchmark for gold trading around the world. The MCX sets gold rates for a number of gold contracts. Gold coins are considered a valuable investment by many people wanting to diversify their portfolios. Gold coins minted by different countries vary in their size, weight and purity of composition; hence their prices also vary.
Rarity is another factor determining gold coin prices. Industrial gold users and large financial institutions including central banks transact mostly in gold bulliion. Gold bullion rates are benchmarked to a handful of reputable firms known for the purity and uniformity of their gold bars. For investors not willing to own physical gold, gold futures offer a convenient, liquid, leverable means of investing in gold.
Gold futures trade on exchanges and markets around the world. Quandl provides share prices and detailed fundamental information for s of stocks, including leading gold producers and gold miners. The World Gold Council publishes live gold rates in 10 major currencies.
Historical data for many more currencies is available here. The stock-to-flow ratios of gold and silver compared to those of industrial and food commodities. One implication of this is that reservation demand is an extremely important factor in determining the gold price.
Data on the annual flow of gold in terms of mining supply, jewelry demand, retail buying of gold eagles or net demand from central banks are insignificant by comparison.
Our friend Keith Weiner employs another approach, which attempts to determine the strength of physical gold demand by comparing spot gold prices to spreads in the futures curve. These spreads provide information on the incentives arbitrageurs have to buy or sell bullion against offsetting futures positions.
We have recently remarked on the fact that the gold price is holding up relatively well in spite of the fact that most macroeconomic price drivers appear not particularly supportive at the moment. We will take a closer look at these drivers below. There are essentially two types of gold price drivers worth discussing: Drivers of the Gold Price 1. Moreover, the supply of and demand for money itself is also an important factor determining its purchasing power. This factor which once again cannot be measured must perforce be ignored in exercises like the calculation of CPI.
For all its faults, CPI nevertheless does give us a rough idea of the speed with which the purchasing power of fiat money is evaporating. The difference between nominal rates and market-based inflation expectations is expressed in the yields of TIPS treasury inflation-protected securities.
Real interest rates are a very important gold price driver, as the charts below attests to. It shows the inverted 5 year TIPS yield compared to the gold price. Inverted 5 year TIPS yield red line vs. The longer term chart above illustrates that the negative correlation between gold and real interest rates is very strong indeed. If one looks closely at the most recent moves, we can see that a gap is currently opening between the two, which will presumably be closed one way or another.
Here is a close-up view:. A close-up of the above chart showing the recent drift more clearly. Unfortunately, there are no hard and fast rules as to which data series is more prone to lead or lag — hence we cannot say whether the gap will be closed by a decline in real interest rates, a decline in the gold price or both. If we incorporate the rate hike, it stands at minus 1. Overall, we would have to say that this is a mixed bag, but in the short term real rates based on TIPS yields are a slight negative for the gold price.
It is well known that credit spreads are very tight at present, and the chart of the HYG-IEF ratio is reflecting this well enough. Junk bond yields are barely above their all time lows registered in , while the yields on treasury bonds are actually still quite a bit above their previous lows but lately decreasing again. Credit spreads are therefore within spitting distance of their all time lows, which indicates extremely high economic confidence.
In fact, economic confidence based on this indicator is currently so high that it should be considered suspect:. Tight credit spreads are normally held to be bearish for the gold price, but in view of how extremely tight spreads currently are, one might want to question the traditional interpretation. We would rather see them as a contrary indicator at the moment. Steepness of the yield curve: The reason is that the curve normally steepens for one or both of two reasons: