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Gold/Silver Overview

Thursday, 23 February 2012, 03:36 (GMT+2)
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All That Glitters

"Gold still represents the ultimate payment in the world". Alan Greenspan

Trading With Gold

Gold is a precious metal with unique properties. The limited production of gold has made it become an ideal currency throughout time and one of the very first ones. Today, with the wide spread of Internet, financial traders and investors can trade online with various gold investment instruments with great ease.

To understand how gold price moves, don’t ever forget that gold is a commodity – and like any other commodity its value is governed by its supply and demand. A higher supply and lower demand means cheaper gold, while a higher demand and lower supply means more expensive gold.

What Drives Gold Prices

Central bank failures and producer de-hedging

In the past few years, most central banks had somewhat easy monetary policies apart from pumping trillions of dollars to stimulate global economy. The attempt to fight recession resulted in having large amounts of money printed and supplied. At the same time, most central banks started reducing hedge positions by producers (de-hedging).

This growth in paper money supply caused an increase in the price of goods and services. This inflation causes confidence in paper assets in general and paper money in particular as a store value to decline. As a result, investors hedge against inflation by purchasing gold. The increase in demand for gold results in the increase of its price. In the current markets inflation means higher gold prices.

It is also interesting to know that that some central banks like those in South Africa, Argentina and Russia are considering purchasing relatively big amounts of gold to add to their reserves.

Global macro economics

After a period of prosperity that lasted several years, bull stocks and commodities markets had a huge turn point after the global economy slipped into recession in 2008. Although many of these markets seem to have recovered, they still suffer from volatility, leaving most investors focused on capital preservation strategies.

While most other hard assets, like real estates and other commodities, tend to lose their value, gold has become an extremely popular investment instrument. The increasing demand for gold due to the effects of the global recession has increased and will increase the price of gold until a full recovery takes place, if any.

Moreover, the ongoing inflationary pressure, the huge U.S. trade deficit, and the move away from the dollar as the main currency for the global reserve are all factors causing an uptrend in the gold prices.

Chinese and other Asian gold trading markets

China is one of the world’s largest producer and consumer of gold. With its global exporting industry entering its golden age, China has access to huge amounts of foreign currencies apart from the large amounts of the United States Dept. of Treasury, which it keeps purchasing. This creates a relatively decent amount of foreign currencies (mainly U.S. dollars) in its reserve, which is actively being diversified by increasing China’s holdings of gold. As long as the increasing demand for gold continues in China, gold prices will increase.

At the same time, in 2004 gold trading restrictions were lifted in India, a country considered to be the largest consumer of gold. The 80% increase in the demand for gold played a decisive role in increasing gold prices, and it also lead to expectations rising for similar results in lifting gold trading restrictions in other Asian countries.

Demand unmatched by production

In the 1990s, gold had a considerable downtrend: between 1980 - 1999 its price dropped from $850 an ounce to $252 an ounce. These low gold prices discouraged mining and gold research companies from investing money in finding new supplies or improving gold mining technologies. As a result, supply could not catch up with the globally increasing demand for gold. It is exactly the gap between supply and demand that keeps driving gold prices up.

Uncertainty, fear and wars

In times of war, major crises or financial uncertainty and fear the demand for gold increases. Gold is seen as a solid asset that can preserve people’s money even if their currency prices are compromised. Just like in the case of any other commodity, the increasing demand would cause the price of gold to go up, creating a favorable opportunity for gold traders to achieve profit.

Gold CFDs

CFD, or Contract for Difference, is a leveraged instrument that enables traders to gain exposure to shares, indices, currencies and commodities. In other words, it is an agreement between a trader and his broker to exchange the difference in value of the contract, between the time when the contract is opened and the time when it is closed.

The first advantage for trading gold CFD is that it makes expensive futures affordable for small-and medium-size gold investors. This means that the trader doesn’t need to buy or sell the whole actual future but rather any fraction of the price the broker allows. For instance, if the NYMEX gold future GC holds the value of 100 troy ounces and can only by bought with an initial margin of $4300 (even with leverage, approximately 5% of the actual future) while with a CFD on NYMEX gold future at a broker with micro lot a position with less than 1% of that margin can be opened. This clearly shows that CFD futures are an affordable version of futures.

The second advantage is that CFDs are often leveraged. This allows investors to adjust their risk and reward ratio. If a broker offers a leverage of 1:200, the broker lends the trader $200 as trading power for every $1 he deposits. So the trader can get the profit or the loss of $200 for $1 only. This makes CFDs even more affordable.

The third advantage is that opening a short position on a future CFD is simple and easy, having exactly the same properties as long positions. This allows investors to sell a future without actually having it and make profits from a declining market. This is something that only very few futures brokers offer and it is often less simple than going short on a CFD.


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Please read these terms and conditions carefully. By accessing this World Wide Website ("Web Site") and any pages hereof, you are indicating that you have read, acknowledge and agree to be bound by these Terms of Use. If you do not agree to these Terms of Use, do not access this Web Site. United World Capital, Ltd. reserves the right to change these Terms of Use which you are responsible for regularly reviewing and your continued use of this Web Site constitutes agreement to all such changes.

1. GENERAL PROVISIONS

1.1. The present License Agreement (hereinafter referred to as the Agreement) is made effective between United World Capital, Ltd. represented by its Affiliated Partners (hereinafter referred to as the Company) and any individual or legal unit (hereinafter referred to as the Client). This Agreement is an integral part of the public documents package, pursuant to which the Company provides services (including services of financial and informational nature, etc.) to its Clients.

1.2. When the Client chooses the services of the Company or otherwise interacts with the Company, she/he fully agrees to all the terms and conditions of all the publicly proclaimed documents. The Client shall immediately cease all interaction with the Company, if the Client does not agree with any article (section, part) of any public document of the Company (namely: if the Client does not agree with the terms of usage of information provided by the Company, etc.).

1.3. The present Agreement determines the rights and responsibilities of the parties involved (the Company, the Clients, third parties) that come into existence, when information materials of any kind or format, published by the Company on its prot;on its proper official Web site, which is publicly available at http://www.uwcfx.com, are transferred, broadcast or published in any other way (namely: information published on other Internet sites, owned by the Company or one of its Affiliated Partners, economic news that is broadcast via client terminals, etc.).

1.4. In terms of the present Agreement legal units or individuals, who receive information from the Company's Web-server (site), located at the aforementioned address, or the Company's trading server, and use the information in any way, are considered information users.

1.5. The present Agreement applies to information, published on the Company's Web-server (site), or broadcast, disseminated, or published via other information channels or reproduced on other information carriers, including hard (paper) copies.

1.6. Other regulations, legal and public documents are applied to particular kinds of information. Particularly:

1.6.1 The Company logo is a registered trademark and is protected by respective legislation, particularly by the International Trademark Law;

1.6.2 Macroeconomic news (news feeds) is a non-exclusive property of the Company, under the license issued by Dow Jones & Company Inc. (USA), and protected by copyright law and other intellectual property laws;

1.6.3 Copyright on materials published on the Company's Web-server by third parties is protected by legislation of the authors' countries of citizenship and international laws;

1.6.4 Copyright on materials published on the Company's Web-server (site) by the Company itself (in its own name) is protected by international laws.

2. BASIC DEFINITIONS USED IN THE PRESENT AGREEMENT

2.1. The following terminology used in the present Agreement has the indicated meaning, if not otherwise stipulated in the present Agreement:

2.1.1 The Company's Web-server (site) is a software and hardware system connected to the Internet and capable of providing information upon request. Herewith, in order to receive information from the Web-server (site), prior authorization may or may not be required from the Client (information user), however, the provisions of the present Agreement equally apply to information transmitted via open channels, without authorization, and via secure channels, if provided authorization is successful.

2.1.2 The Company's Trading Server is a software and hardware system connected to the Internet and capable of providing a certain amount of information upon request, if provided authorization is successful. In particular, the information may include the financial instruments quotation flow and economic news.

2.1.3 The process of receiving information by a user refers to data received from the Company's server (or other transmitting device or system) by the Client's hardware (if the provided hardware is connected to the Internet or other communication channels). With regards to the information dissipated (reproduced) on hard copies, this is (a) process(es) connected with acquisition, reading and understanding of information.

2.1.4 Information or data represented in electronic or other form: texts (having any nature and content whatsoever, including encrypted texts, such as scripts, passwords, etc.), images, design elements and photos, as well as audio and video records.

2.1.5 Information usage refers to the possibility of viewing data using software installed on Client's hardware (client terminal, browser, etc.) or the possibility of  converting, copying, duplicating, or transferring to other carriers or to transforming (in particular, production of hard copies), duplicating and deleting this information by whatever means. The transfer of the data to third-parties by any means is also considered information usage.

3. THE RIGHTS AND RESPONSIBILITIES OF CLIENTS

3.1. When using information, whether published on the Company's Web-server (site) or broadcast (published) in any other way, the Client shall:

3.1.1 Provide during registration precise, actual and full personal information (to the extent necessary for registration); in the case that there are actual changes in this data (for example, change of residence, surname (for any reason), telephone number or other personal registration data), please make relevant modifications in a timely manner. Registration data may be changed, for instance, by contacting the relevant Company employee via the contact form.

3.1.2 Do not attempt to register a third party on the site, even if this party is aware of or has you asked to do so; consequently any person who wishes to register on the site shall do so independently.

3.1.3 Make appropriate arrangements to ensure security of the data, which may be used to obtain access (authorization) of any system (service) provided by the Company. This regulation applies to passwords, logins, identification numbers, etc.

3.1.4 Observe effective international laws, as well as legislation within the Client's country with regard to copyright law and intellectual property protection.

3.1.5 Do not attempt to use the Company's Web-server (site) using software with the aim of hindering (or damaging) the operation of the Web-server (site), its individual service, or cause non-operability of the server and/or its individual service (inaccessibility of server and/or its individual services), or in any other way disrupt the normal operation of the servers. In particular, the Client shall not attempt to automatically collect non-public data or information that belongs to third parties, the Client shall not attempt to register automatically. Moreover, the Client shall not attempt to overload the Web-server (site) or trading server with useless information with the aim of causing malfunction and/ or to impede normal access of other users to the Web- or trading server.

3.1.6 Be fully and solely responsible, according to effective legislation and public documents of the Company, for all actions, carried out using the Client's account, including actions that caused damage or loss to the Company (namely: the Client is responsible for any unlawful (or inconsistent with Company public documents) actions carried out via his/her account).

3.1.7 Do not use any service that allows publishing of any data, or in any other (as well as unlawful) way publish on the Company's Web-server (site) information, which contains threats, discredits or abuses honor and dignity of third parties, is vulgar or indecent (in particular containing offensive words), advocates racial, religious, or ethnical discrimination and hostility, or any information that either directly or indirectly violates protected human rights, rights of citizens or legal entities (in particular, any information published in any form (format), including logins (nicknames), conference publications, etc.).

3.2. With regards to economic news broadcast by the Company under license of Dow Jones & Company Inc. (USA), the Client shall:

3.2.1 Observe effective copyright and intellectual property laws.

3.2.2 Not store, copy, reproduce, disseminate, transfer via communication channels or in any other way, not publish, not create own information on the basis of the news, not reproduce on the air, not issue and/or duplicate the news.

3.2.3 Use news for personal purposes as a source of information or, at his/her discretion, as a basis for analysis of an economic situation.

3.2.4 Not use for commercial purposes, no neither sell nor provide access to it for commission.

3.3. When using information provided by the Company, the Client has the right to:

3.3.1 Independently choose at personal discretion and for personal use any information published by the Company on the Web-server (site) or broadcast via a client terminal or via other channels.

3.3.2 Use any information for personal use to the extent that it does not contravene the present License Agreement.

4. COMPANY RIGHTS AND RESPONSIBILITIES

4.1. When providing Clients with information (by any means via any channels) or publishing freely accessible information, the Company shall:

4.1.1 Take every possible measure to make information actual, precise, full, timely, consistent and useful.

4.1.2 Consider the demands of Clients firstly and consistently adjust volume, composition and quality of publicly available information or information, which is personally broadcast via secure communication channels.

4.2. When providing Clients with information (by whatever means via whatever channel) or publishing freely accessible information, the Company has the right to:

4.2.1 Adjust, add, remove, and transform the whole structure, composition and quality of any information at its own discretion.

4.2.2. Create or remove services hosted on the Company's Web-server, and to limit access rights to these services at its own discretion.

4.2.3. Take decisions with regards to the provision of publicly available information (via public channels) or in confidential manner (via secure channels, subject to successful authorization) at its own discretion.

4.2.4 Take decisions with regards to the price of the information provided, access (subscription) this or that service hosted on the Company's Web site at its own discretion. In particular, the Company reserves the right to charge extra fees for using this or that information or service.

5. RESPONSIBILITIES OF THE PARTIES

5.1. The official Company's Web-server (site), including all the software operated on the Company's Web-server (site): graphic, audio, video, and text content is accessible for use as is.
The Company does not guarantee that the Site or its services fit (optimally), meet specific ideas or expectations of the individual User or groups of Users with regards to using for specific purposes that the User has in mind. The Company does not guarantee that any (expected, supposed, or possible) results will be obtained by using of Web-server (site) and/or any separate service.

5.2. With regards to the economic news broadcast under license from Dow Jones & Company Inc. (USA), neither the Company nor the lawful holder can guarantee that the information is full, precise, regular (periodic), and they do not bear responsibility for any damage or loss, which is somehow related to the use, non-use or inappropriate use of the aforementioned information, even provided they are aware of such potential loss or damage.

5.3. With regards to analytic, journalistic or educational publicly available information published by Company or broadcast via communication channels, Company disclaimsany guarantees (direct and indirect/supposed), irrespective of owner of copyright (author's rights) on the information.

5.4. Parties are liable under the effective legislation, when they establish relations pursuant to the present Agreement.

6. AMENDMENTS

6.1. The Company reserves the right to make amendments and additions to the present Agreement. In particular, it may take place in cases, which are not described directly or indirectly in the current edition of the Agreement or if a rule or law emerges that requires a corresponding amendment or addition.

6.2. Amendatory procedure:

6.2.1 Should amendments and/or additions be made, the Company shall inform the Clients of this fact by posting relevant notice on the Company's official Web site and sending  a relevant message via the internal mail system.

6.2.2 The fact of posting the relevant notice on the Company's Web site and sending messages via internal mail are considered to be the Client notification of the amendments and/or additions, whether the Client reads and understands a corresponding text or ignores it.

6.2.3 The amended document becomes effective after 5 (five) full astronomical days (120 hours) following publication of the notice on the Company's Web site, before this time the notice has an informative (voluntary) nature.

6.2.4 The amended document immediately applies to any accounts registered after its publication (irrespective of other accounts registered earlier, which its holder may possess).
The amended document applies to trading accounts that were registered before its effective date when the document came into effect.

6.2.5 In the case that a rule or law is introduced, which requires a corresponding amendment to the present Agreement, then the rule or law shall be applied immediately after the effective date of the relevant statutory act, whether the required amendment and/or addition is made or not. Regulations of the present Agreement that contradict the newly introduced rule or law become void one the corresponding amendments to the aforementioned document go into effect.

7. FINAL PROVISIONS

7.1. The Company considers tasks connected with the continuous and timely provision of valid information support and provision of access to information services to Clients its affair of honor. However, conditions, which are not controlled by the Company, may emerge and make the aforementioned tasks problematic or impossible.

7.2. All the disputes that may occur shall be resolved in compliance with the effective legislation and Company's public documents by means of negotiations or claims.

8. ACCEPTANCE BY THE CLIENT

8.1. I agree with all the conditions of the Company's public documents for using the Company's services and will immediately cease using the Company's services in case of disagreement.