Prior To Conducting XAUUSD(Gold) Trade

Things Must Know! Prior To Conducting XAUUSD(Gold) Trade

Investing commodities must have a market for exchange, and as for free exchange there would definitely have regular price fluctuations, and price changes usually depend on the mainstream consensus formed by market participants’ bids for the product. The higher the price and the rapidity are both the key to complete any transaction process of commodity pricing. When analyzing the trend of the XAUUSD(Gold), if you can also pay attention to the important role, event, economical data and key statement that affecting the price, it will help readers to have more in depth understanding of the outlook.

Major Participants in the XAUUSD Exchange Market

1.   Central Banks of Each Countries
Since the early day of the financial world, XAUUSD has played an important role in economic activities as an asset value storage tool and a medium for transaction. When the governments of various countries required USD, whom would trade-in-or-out on the international market to regulates their Gold or USD reserves.

The figure below takes the Central Bank of Russian Federation’s purchase of gold reserves from the end of 2017 to February 2018 in order to accelerate the de-dollarization policy and increase other foreign exchange assets as an example. The bank’s buying demand pushed up the price of gold from US$1,240 per ounce to US$1,358 per ounce, and in March of that year, the Russian Central Bank’s gold reserves totaled nearly 2,000 tons. It can be seen that the gold purchases of central banks have had a significant impact on the price of gold.

Purchases of Gold by Central Bank(s) Formed Strong Support
From the end of 2017 to February 2018, the Central Bank of Russian Federation purchased gold reserves in order to accelerate the de-dollarization policy and increase other foreign exchange assets as a background, pushing up the price of gold from 1,240 USD per ounce to 1,358 USD per ounce.

The World’s Major Gold Official Reserves
According to data from the World Gold Council in December 2020, the current global official gold reserves are about 35,171 tons, and most of the stocks are mainly concentrated in the top ten economies listed on the right, what accounted for more than 70% of the total.
From another perspective, the total amount of gold also implies the corresponding ability of the economy to adjust the total amount of foreign exchange. Therefore, whenever there is information about a large-scale purchase of gold by the central bank of a certain country, the price of gold often fluctuates significantly in the recent period.

Major Gold ETFs in the World

2.  Gold ETF
ETF is the abbreviation of Exchange Traded Funds, which refers to trading open-end index funds, can also be called as exchange-traded funds.
The world’s largest gold ETF is the US SPDR Gold shares, with holdings of more than 1,100 tons, followed by the US iShares Gold Trust. The total holdings of these two companies account for a huge share of the global gold ETF, which played a huge role in the market



ETF Sell-Off Forms A Huge Downtrend
In November 2020, the US SPDR Gold shares ETF purchased gold on only 2 days of the whole month, and the rest were closing positions of varying degrees. The huge selling pressure caused a difference of US$201 per ounce between the ridge and trough of the month, which shows that its impact is significant.

Epilogue
To sum up, in the gold trading market, if readers can pay attention to the movements of these two key points(the major nation’s Central Banks and Gold ETFs) when conducting basic analysis of gold, so for the analysis of the development of the gold price market outlook, it will be able to play an important auxiliary effect.

Remark:
The gold reserves of major central banks can be checked on the official websites of central banks or the websites of the World Gold Council.
Gold ETF holdings can be inquired on the World Gold Council website or online search keyword section to confirm the daily changes.
See more:
Prior To Conducting XAUUSD(Gold) Trade
Five Factors Effectively Determine The Trend Of Gold Prices

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