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Wednesday, November 27, 2013

What Factors Affect Gold Price in UAE?

Across the world gold price has show high fluctuations recently. The big gold boom was first halted, then reversed and is now slowly going up to the higher range. The price of gold is affected by many national and international factors.

  1. Tax and Import Duties: Because there are only a handful of nations which produce any significant gold, most of the nations import gold. The import duties and tax rate changes on gold can directly affect gold price.
  2. Central Bank Reserves: Most of the countries including US and European countries has gold as reserve for the paper currencies in circulation. The recent increase and decrease of demand of gold by these central banks have greatly affected the gold prices.
  3. Gold Demand: Countries like India, China and US are main consumers of gold, mostly as jewelry. The festival seasons, economic growth and investment preferences of these countries greatly affect gold price.
  4. US Dollar Value: Internationally gold price is noted in USD and gold tend to show a inverse relationship to USD. So when the dollar gets strong, the gold price decreases and when the dollar gets weaker, then the gold price increases.
  5. Gold Production: Although many new large scale gold mines became operational in recent years, the gold production is getting stagnant or low because of fast exploring of easy reserves. Now most of the gold are mined from very deep mines and the production cost is very high.
  6. Investment and Wealth Protection: Most cultures and investors consider gold as a safe investment which can also be used to hedge against inflation, deflation, economic recession and currency devaluation.
This blog is written for Orient Financial Brokers, an online gold trading broker offering online precious metals trading for traders across middle-east.

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Monday, November 18, 2013

Forex Trading Strategy of Combining Spot and Option Transactions

Forex traders across the globe follow a number of different trading strategies to profit from the market. The combining of spot forex and forex options is one such strategy which aims at reducing downside risk of capital loss and for maximizing a profiting opportunity. There is also an alternative strategy available where forex futures are used instead of options.

In the forex spot and options combination strategy, the trader plans to enter a forex trade with a relatively long-term perspective. But daily price swings or high volatility in price may cause premature closing of his position because of margin call on leverage. So in order to reduce this downside risk of losing money and margin call, the trader use forex options with opposite effect. So if the trend breaks or margin call happens, the trader can recover most of the money from the option contract. And if spot trade is a successful one, then the only loss is the option premium.

The success with forex spot and options combination depends on traders’ ability to analyze the trends and to time market entry and exit. The strategy is also less expensive compared to the profit one can make from the transaction or to the loss one may suffer. The strategy of using futures instead of options is usually more expensive for retail traders.

This blog is written for Orient Financial Brokers, a leading online spot forex trading broker in UAE offering online forex trade on an advanced forex software platform.

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