Gold 
Gold has been used as a measure of value since prehistoric times. Gold as a form of currency grew popular under the Romans, when Julius Caesar minted gold coins to pay his army. Soldiers were pleased when the market value of the coin surpassed the face value.
A key benchmark metal, gold has an important role in financial markets.
Until 1971, the Bretton Woods System, enacted in 1946, created a system of fixed exchange rates that allowed governments to sell their gold to the United States treasury at the price of $35/ounce. President Richard Nixon ended the Bretton Woods system. At that point for the first time in history, formal links between the major world currencies and real commodities were severed, with almost all of the worlds currencies moving to a fiat system of valuation where the money had nothing backing it.
Gold’s record high was $850 an ounce on 21 January 1980 and record low was $252.90 an ounce on 21 June 1999.
Industrial production also relies heavily on gold. It is resistant to corrosion and is a fluid conductor of electricity, making it a critical element in high tech and electronic production processes. Most electronic items like mobile phones, computers, and flat screen televisions contain a small amount of gold, which is critical to the reliable and efficient functioning of the equipment. A automobile ABS system contains gold, as does the electronics controlling the inflation of car airbags in the event of a crash. These components would not function as reliably, some not at all, without gold. Gold prices directly affect the cost of goods across the consumer spectrum.
Gold is measured by troy weight and by grams. 24 karats is considered pure gold, with lesser karats given lower designations.
Gold’s price reflects its rarity, along with supply and demand at any given time. Only three parts out of every billion in the Earth's crust is gold.
Gold Trading Instruments
The gold market can be traded through many different avenues, stocks, funds, ETF, futures, commodities and options.
You can monitor different groups of gold stocks through different indexes. Some of these indexes can be traded directly.
HUI : Amex Gold Bugs Index
GOX : CBOE Gold Index
XAU: Philly Gold and Silver Index
Gold futures are also traded Chicago Board of Trade (ECBOT) and the New York Mercantile Exchange (NYMEX).
Economy, the Dollar, and the Gold Push
Events in the economy, both long and short term, affect the price of gold. As confidence in the long term health of the economy weakens, often investors and traders will move toward gold as safehaven investment. War, recession, inflation, and government inability to effectively deal with domestic problems accelerates this price escalation.
The most important factor in gold prices is the value of the dollar. Behind the value of the dollar is faith in the dollar, domestic and international faith in the dollar is based on the same economic factors that affect gold. As the value and faith in the dollar decreases, the value of gold increases.
The largest negative effect on today’s dollar is deficit government spending. Our government is spending money it does not have. To do this, it relies on the Federal Reserve to print and inject money into the system. There are simply more and more dollars available and the value declines. Supply and demand controls the price of the dollar, just as any other trading instrument.
Look at the value of gold as represented in XAU. Since the beginning of huge government deficit spending after 9/11, the value of gold has responded with a steady escalation.
Gold at a 28 Year High
With the dollar headed to record lows, gold hit a 28-year year high at $739 per ounce. The latest announcement by the Federal Reserve was a 50 basis point cut in the Federal Funds Discount Rate. Lowering the interest rate is same as lowering the value of the dollar. Look at the response of the gold markets to this news. A clear breakout of a bullish symmetrical triangle (see how to read a chart for more information on chart patterns).
Consider All Things
TradeWithPros wants to impress on members that they must consider all facets of the markets and economy when trading. All trading instruments are linked in some financial fashion all affecting supply and demand stocks, commodities, and currencies. Have a working knowledge of all these facets and your trading will improve as well as your confidence.
Gold is only one precious metal to consider in your trading.