Different Trading Strategies Essay

Past and Present Analysis of Gold Price

With the abolition of Bretton Woods Gold Standard between 1971 and 73. since so. the monetary value of Gold in the international market started to lift from $ 35 to $ 100. Ten old ages subsequently. another important rise of gilded monetary value happened trebling its original monetary value from $ 100 to $ 300 ( Smith 2003: 1 ) . There are some cases that the rise of the monetary values of gold is associated with the public presentation of the dollar currency every bit good as oil monetary values. It is said that during the invasion of Iraq to Kuwait in 1990. due to political tenseness. oil monetary values increased from $ 10 to $ 27 along side with the monetary value of gold which besides increased by 5 % since it reacted in the inflationary force per unit areas imposed by the oil monetary value hiking.

Back in the 1980. there was an oil monetary value shocked happened in the market that caused major inflationary quandary to assorted states around the Earth. Thinking rationally. those gilded excavation houses would incur higher operational costs from pull outing gold from the evidences. in order for their net income non to be affected by the oil monetary value addition. they would go through it to the gold purchasers and so with the remainder of the narrative ( Saville 2006: 1 ) .

With respects to the relationship of gold monetary values to dollar currency. during the early 1980’s merely like what truly go on in the fiscal market. as the dollar currency weakens monetary values of gold additions since it could besides transport value. Before. gold service as a criterion of pecuniary unit in most of the states across that Earth until such clip that it could no longer combat assorted fiscal jobs locally and internationally that gives the states. particularly US. to come up with another pecuniary criterion that would hold the capacity to turn to assorted fiscal jobs and this is the start of the coming of Dollar Standard in the fiscal market. Well. puting aside the issue on Dollar Standard. this clearly shows that gold could besides function as a pecuniary bearer. This lone means that gold has the same features with money in footings of being used in interchanging goods and services.

In order for us to to the full understand the nature of gold industry in the market. we besides have to see the current state of affairs of gold market for us to be able to compare its public presentation.

Harmonizing to Business Week. the current monetary value of gold in the market has already reached above $ 700 per ounce as of September 6 of this twelvemonth. Those investors who bought gold prior to the addition in the monetary values were now glad about the state of affairs since they could gain “premiums” from presently selling their gold in the market. It is non merely those “gold investors” who benefited in the said gilded monetary value addition. Mining industries were besides basking the good public presentation of the monetary values of gold. Indexs of assorted gold excavation houses gained from a lower limit of 4 % . This period is being treated by most of the excavation companies as one of the great chances for them since they could gain a batch of net income from selling gold in a market where higher gold monetary value prevails.

Prior to this period. there was a series of panicking of investors sing the stableness of fiscal market. It is said that monetary value of gold somewhat fell due to the merchandising of voluminous gold in the market giving manner for gold excess. The ground why investors were really eager to sell their gold’s in manus is for them to raise equal sum of money to stabilise the fiscal status of their companies. But this event did non last longer and presently back into its normal status. Long term uncertainties of investors have already dropped.

Market analysts said that we are lucky that gold do non act much like of a trade good in the market because if it is the monetary value of gold would decidedly strike at $ 900 to $ 1000 per ounce today. The ground behind the sudden addition in the monetary values of goods in the market is due to the extract of voluminous imported goods coming from China. We should be grateful that gold has a fewer practical applications as compared to trade goods. This is the ground why most of the economic experts would desire the gold to act more of a currency than of a trade good.

The Effects of Chinese Yuan Reappraisal in the Global Financial Market

With the reappraisal of the Chinese Yuan in the international fiscal market. it could perchance enforce some force per unit areas in the Chinese authorities. It is said that the Chinese cardinal bank revalue their currency by 2 % against the US Dollar ( Chan 2005: 1 ) . One of the possible effects of this scenario would be that China could now import more of goods and services from US and other European states since they would now necessitate less Yuan in purchasing foreign merchandises. Importing is one manner of bring forthing merchandises which raw stuffs can merely be found to other states. This would assist those companies. which depends much on imported natural stuffs to bring forth goods expeditiously merely like China.

It is non merely China that is traveling to hold positive public assistance from holding their currency revalued. US and other European states could now take the chance to export more to China since the demand now of their merchandise to Chinese domestic market is high. This would give an avenue for a stronger trading relationship of the said states with China. The lone job of Chinese authorities now is on how to do their exports to increase given that their currency has revalued. Surely. the comparative monetary value of Chinese export would now be expensive and this has to be fixed by the authorities if they do non desire to hold unstable fiscal status since most of their exporters are borrowers from assorted banking and other fiscal establishments.

Other possible effects of Yuan reappraisal would be more FDI would travel to their economic system since investors would take advantage of the inexpensive labour and importing costs. It is usual for the foreign companies to put up their ain mills in the China to avail the low pay rate of Chinese workers. Since purchasing the natural stuffs in China is expensive. with the assistance of reappraisal. foreign companies could now import natural stuffs from their state or from other states since it would non be them much. With this. they could now bring forth cheaper terminal merchandises. After the merchandises have been produced. they would now export it to assorted states were to sell in the domestic markets. One illustration of company that works in this mode is the Coca Cola Company. They have their ain fabrication subdivision in China to cut their costs of production.

Even though Chinese Yuan revalue it does non needfully intend that stock investors would now puting to Chinese stock market. One of the grounds why Yuan revalue is due to the fact that the said state is presently utilizing drifting exchange rate government. Meaning Yuan fluctuate based from the public presentation of the market and anytime it could appreciate or devaluate.

Because of this. there is a large uncertainness on the portion of the investors for the ground that they might acquire losingss if Yuan depreciates merely after a few hours in the stock market. Furthermore. there is a possibility that the current foreign stock investors would now retreat their stocks in the market and put it to other states with less market hazard that involves. Financial establishments will be the one left perished during these scenarios since they would hold to confront the escapes of stock from assorted companies. As we all know. backdown of stocks from the books of any company would cut the available capital to be used by the company in financing their operation.

At the terminal of the twenty-four hours. with the Yuan reappraisal in the international fiscal market. China would now go a major menace to US and Europe ( TheHinduBusinessLine. com 2005: 1 ) for they could still export more goods to this two developed states since the addition in the comparative monetary values of Chinese goods will merely be offset by their efficiency in the production country every bit good as the handiness of cheaper labour which is a major factor in finding the monetary value degree of their goods. Their exports incurred less consequence from the reappraisal due to the presence of inexpensive labour in the market and this would enable China to vie equally with US and European states.

Mentions

Chan. John ( 2005 )China’s Yuan Revaluation a Response to Increased US Pressure[ online ] . Available: hypertext transfer protocol: //www. west southwest. org/articles/2005/jul2005/yuan-j29. shtml [ Accessed 3 October 2007 ] .

Saville. Steve ( 2006 ) The Gold Oil Relationship[ online ] . Available: hypertext transfer protocol: //www. gold-eagle. com/editorials_05/milhouse090506. hypertext markup language [ Accessed 29 September 2007 ]

Smith. Randy ( 2003 )Gold Overdue for $ 2. 700? ![ online ] . Available: hypertext transfer protocol: //www. usagold. com/goldenchalkboard/gc_punting. hypertext markup language [ Accessed 29 September 2007 ]

TheHinduBusinessLine. com ( 2005 )The Yuan Consequence[ online ] . Available: hypertext transfer protocol: //www. thehindubusinessline. com/2005/07/23/stories/2005072300581000. htm [ Accessed 04 September