Commodities, as opposed to stocks, currencies and indices, derive their value from intrinsic properties rather than associated ones. The value of a penny or a cent often greatly exceeds the value of the metal from which it is made, whereas the value of gold is directly related to intrinsic characteristics, such as weight and purity. Due to the intrinsic value of gold and its limited availability (preventing inflation in price), a certain minimum value is thought to exist below which a troy ounce of gold should not fall. As such, gold serves as a secure asset which is associated with a value surge when the market suffers from uncertainty.
The tangible value of gold versus the conceptual fundamental value is said to define the movements in its value. A rule of thumb is that the price of metal commodities, gold in particular, is very sensitive to economic conditions. Also, if an important central bank announces a round of quantitative easing, a reduction in interest rates or an increase in money printing, investors might turn to commodities to mitigate the risks of inflation or stock devaluation. The economic crash of 2008 was indeed followed by a sharp increase in gold price as investors lost confidence in the market.
Gold has been reported to have had a diverse demand from global markets by the World Gold Council’s first quarterly (Q1) report of 2013. Although a significant increase in the Far East and the Middle East has been reported for gold jewellery, a total demand of gold has gone down 19% in comparison with the 4th quarter of 2012. Some have suggested that this trend implies an increase in consumption coupled with a decrease in investors’ anxieties, and an overall cautious vote of confidence in the recuperation of the world’s economy. Following this logic, gold proves itself as a bet-hedging strategic investment at uncertain times that can reclaim its value, even at a relative loss, when markets recover – much like an insurance policy.
When considering trading binary options in gold, it is important to be attuned to the level of uncertainty that exists in the market. As a non productive asset, gold options could be generally thought of as prone to sharp increases in value and rather soft following decreases. However, when trading in binary options over very short periods of time, and considering the volatility of gold (which is known to fluctuate by 30%), this proposed trend might not hold true, especially when obvious entry points, such as imminent inflation or austerity plans are announced, do not present themselves. As such, considering price fluctuations and the psychology of gold acquisitions, investing in gold binary options holds a certain risk but also a significant potential benefit to the shrewd investor.