By: Chime Amara
What are bullions？
The term bullion is used to refer to high volatile pairs such as Gold and Silver which are used by investors today as a hedge against inflations. These two pairs move almost in the same direction to each other in the market today and have become the investors' favorite in times of uncertainty and rising inflations.
A simple guide on how to trade the bullions
To trade the bullions effectively, the trader needs to pay attention to both fundamental and technical analysis as these two factors determine the movement of bullions. Gold and Silver respond so much to economic news relating to the US dollar. Positive news for the dollar affects the bullions negatively and vice-versa.
Therefore, any trader who wants to trade bullions effectively will need to follow all news in the economic calendar that affects the dollar.
The technical factor refers to price actions; which is how the bullions have responded to different economic activities often stated in the economic calendar. This helps the trader to predict the possible target for the bullion when such factors re-occur again.
Major Fundamental Factors that move the Bullions
Increase in Interest: Given the fact that the US dollar is pegged against the bullions, an increase in the interest rate strengthens the US dollar which discounts on the bullions.
Market Sentiment: Traders are very frequently attracted to the bullions during the risk-on modes. Also in times of uncertainty, bullions have been the traders' safe-haven.
High Demand: The bullions are highly demanded commodities across the globe. Hence their prices are often affected by the supply and demand principles.
High Inflation: Very often the bullions are used as a hedge against inflation. Thus, when inflation is high, investors diversify their portfolios into bullions leading to high prices during these periods. The bullions also when inflation diminishes.
