Global Events Effecting Gold Prices?

At the Academy of Financial Trading Blog we’ve talked before about the value of real assets, however there’s never been a better time to illustrate the point than now. So why is the situation in the Ukraine pushing up gold values, and what does this mean for online trading?

Real assets, as we’ve previously explained, are literally real. Unlike financial assets, which are things like shares and stocks, when you invest in real assets you are investing in tangible things; in the product/resource itself.

Naturally this means that the value of real assets in the online trading game is very different to the one held by financial assets. You trade in financial assets when you’re playing the short term game; you invest in real assets in the long term. This is because real assets tend to be valuable in times of market turmoil.

This makes sense, as when the market is turmoil (made so by bubble’s bursting, current affairs casting doubt on supply etc.); shares that physically have no value go down in price. Consequently when you can’t be sure of the value of a share, you place more value in something physical just because it always has value; you can always use it no matter what is going on in markets.

Gold is the perfect example of the real asset; it always has been. Gold, because of its value as a precious metal that has been recognised as valuable since ancient times, has always acted as a real asset in times of market instability. This is because people always find value in gold, even when currency is inflating. It’s why nations around the world have gold reserves, to enable international trade in times when their currencies don’t hold much value.

Now we turn our attention to the current situation. The Ukraine’s Crimea region has been invaded
by Russia and the region has been deemed unstable. Furthermore at the time of writing gold prices
currently stand at $1,350.04 per ounce, only slightly down from a four month high of $1,354.80 on

Monday. See the connection yet?
The instability in the Ukraine has made people doubt oil availability; a large part of Europe’s oil comes from Russia via the Ukraine. Also threats of economic sanctions on Russia have made people doubt market stability. Therefore gold prices have risen because prices in markets have fallen due to instability in the region.

If this teaches you anything it should be that in online trading you always have to keep tabs on current affairs; if you don’t you could be left seeing your investments plummet in value. Always remember when financial assets and when real assets should be utilised to ensure success in the financial trading game.

The Importance of US Dollars in Financial Trading

Whenever you start financial trading you’ll notice that everything’s priced up in US dollars. At the Academy of Financial Trading we recognise that this can be confusing to people who don’t know the culture of financial trading. So what is the importance of US dollars in financial trading?

First of all the US dollar is important in financial trading because it is the unit of currency used in the United States of America. The US is the largest economy in the world and this alone means that the US dollar has immense value for everybody else.

This is because of the investing power the US holds. A good lesson to learn is that the larger the economy, the greater scope it has for ploughing that money back into businesses around the world. This means it makes sense that they are trading in the US dollar, because they’re business is largely fueled by investment from the US.

However it goes further than this .The US dollar is used as the standard unit of currency in international markets for all sorts of commodities and products.

This means that if you are investing in the Indian gold market, you’ll be doing it in terms of dollar worth. If you’re investing in the technology markets of Japan you’ll be doing it in dollar terms. Whatever company in whatever area of the world you’re trading in, it’ll be in dollars.

This practice is so common place that a whole host of non US based companies even list their share prices in US dollars. Airbus is one notable example where this happens.

Furthermore the US dollar is one of the world’s most popular reserve currencies. A reserve currency is a currency that a country hold in large amounts (that is not their own) that is used in international transactions between nations.

So when a nation makes a trade deal, for example, with another nation, it’ll do it in a popular reserve currency such as the dollar. This is because both nations find value in a reserve currency; whereas there might be problems if the nations used their own currencies in terms of value and exchange rates. The fact that many nations recognise the dollar as a reserve currency speaks highly about its value.

In conclusion a currency only holds so much value as people are willing to give it. The US dollar is generally held to be one of the most valuable currencies in the world; this is why the US dollar is so important in financial trading. 

An Economic Guide to Japan

Considering that rising Japanese inflation has come to our attention recently, this week the Academy of Financial Trading blog thought we’d bring you a basic guide to the Japanese economy. Why do you need to know about it to succeed in financial trading?

Basically Japan is the third largest economy in the world, behind only the US and China. Considering that the larger the economy, the greater impact it has on global financial affairs, it stands to reason that Japanese economic activity stands only behind American and Chinese in nations that could have an effect on markets that could alter your financial trading strategy.

Now for a little history lesson. The Japanese economy was devastated by its loss in World War Two, however it quickly recovered, and in the three decades following 1960 expanding majorly because it cut defense spending to solely focus on economic growth. However more recently the country has been dealing with a 15 year long deflation problem.

Today Japan is impressive statistically. It is the country with the third largest GDP (Gross Domestic Product, a nation’s market value of all its final goods and services) in the world. It is the third largest car manufacturing country in the world and has a large electronics industry that is valued by many.

Japans key exports (goods and services it sells to other nations) are cars, electronic devices and computers. Its key imports (goods and services it buys from other nations) are raw materials such as oil, foodstuffs and wood. Trade partners include the US, China, Singapore, Hong Kong, Germany etc.

From this it’s easy to see why you have to watch what’s going on in Japan. It trades with many countries heavily; meaning that any economic development in the island nation could have ramifications internationally and its role in a myriad of industries indicates that trading in any of these areas means you’ll have to deal with Japan in one way or another.

Generally Japan is a strong nation that can bear economic storms well, however it has its fair share of issues. One problem we’ve already alluded to is its 15 year battle with deflation. Deflation is a fall in consumer prices throughout the economy, usually coming at a time of high unemployment.

This has proved a key issue in Japan because lower consumer prices mean that companies are less eager to sell in your country. Nobody wants to sell their product at a loss and this has had a shrinking effect on Japanese economic growth. However despite this Japan is still a thriving market.

Japan is an amazingly innovative, diverse economy that has an impact on numerous areas of global trade. This is why you need to know about Japan in financial trade, so you can anticipate how its developments may affect your investments. 

What is the World Bank?

If you’re hoping to succeed in financial trading, there are several financial institutions you need to be familiar with. One of these is the World Bank. Saying this, what is the World Bank and what relevance does it have to financial trading?

The World Bank is a global financial institution that engages in the practice of providing loans to developing countries for capital programmes. These are programmes that involve upgrading the infrastructure of society or business.

These programmes are essential to aiding in the development of emerging economies. This ties in with the goal, that according to the World Banks official website, it has set for itself. This goal is to reduce poverty internationally.

Specifically the World Bank has a range of low-interest loans, interest free credit options and grants that they provide aid to emerging economies to tackle the issue of poverty. The types of programmes these cover are numerous and cover areas such as business, environment, gender equality, combating HIV/AIDS, education, economy and culture.

The World Bank itself is one of a number of financial and humanitarian institutions under the leadership and governance of the United Nations. This means that it sits above the business world and is staffed by representatives from member states. Member states also fund the World Bank; however it also receives its funding from other avenues, such as bond issuance's.

So why do you need to know about the World Bank when engaging in financial trading? The answer to this lies in the role the World Bank plays in aiding the economic developed of emerging markets.

The World Bank helps these countries grow. It provides the capital they need to develop, to strengthen their production capability etc. Logically then the activities of the World Bank can be used to determine which emerging economy is the one to watch. 

Say for example it provides funds to Mexico to grow its car manufacturing industry. Mexico’s car manufacturing industry is already growing, already one to watch. The news of extra funds may indicate you should pay more attention to it, as well as the companies involved. 

Consequently the activities of the World Bank can indicate which economies you don’t want to get involved in. Take Argentina. Ever since their 2002 economic crash they’ve struggled getting financial assistance from the World Bank. This is a further indicator to avoid Argentina at the moment if you wish to be successful in financial trading.

At the Academy of Financial Trading we realise that in order to be successful in financial trading you have to know about certain financial institutions. We seek to ensure that you are fully equipped with this knowledge, ready to use it to your advantage when you start trading.

LINKS TO INFO: http://www.worldbank.org/en/about/what-we-do, https://www.imf.org/external/np/exr/facts/imfwb.htm

What Do BRIC and MINT Mean in Financial Trading?

Have you ever heard the terms BRIC or more recently MINT countries? If you’re looking to get into the financial trading game, you just might need to know what they are and how they work. Why are they important?

BRIC Countries

So let’s start with the BRIC countries, since they’re the ones that have seen the most interest from those in the financial trading game over the past decade. The BRIC countries first came to the attention of the financial trading community in 2001; the term was coined by celebrated economist Jim O’Neill

BRIC is in fact an acronym for four countries. These countries are Brazil, Russia, India and of course China. So why did O’Neill decide to bring so much attention to these emerging economies back in 2011.

Because they were emerging. Back in 2001 these countries were all enjoying favourable (and similar) economic climates. At the time it indicated a global shift in economic power due to population growth, eligibility to work, economic strength and availability to natural resources.

These are the factors that provided them with room for economic growth. They had more materials and a growing population to turn these materials into products that westerners would want to buy in their droves.

They basically had more potential than the western G7 countries, which were seen as the most economically wealthy in the world, because they had more room to grow. The G7 countries had already been growing and had less potential room for more growth.

This is why they were and somewhat continue to be important to know about in financial trading. The next decade saw the BRIC countries (especially Chia) grow leaps and bounds economically. Today they occupy a significant place on the global economic stage and you have to watch what happens with these countries to truly capitalise in financial trading opportunities.

The economic power of these nations is now somewhat waning. They still have power, but a decade of unprecedented growth has now been confronted by the reality of growing your economy. It has consequences. China last year experienced its slowest rate of growth in 14 years and Russia and India have recently been plagued with financial issues.

MINT Countries

So now we turn our attention to the MINT countries. Again an acronym, the four countries in question are: Mexico, Indonesia, Nigeria and Turkey. These are the new emerging economic powers to watch as we enter the second half of the decade.

There are two reasons O’Neill has turned his attention to the MINT countries. Firstly, they all have a positive ratio of people eligible to work against people not working over the next two decades. More workers mean more products to export, fostering more opportunities meaning greater scope for growth.

However these countries are also often seen as strong contenders for economic growth because of their geographical location. Take Mexico. It has capitalized on emerging US interest in its capabilities but is also in a great position to take advantage of rising Latin American economic activity.

This is why the Academy of Financial Trading suggests that you be watching both the BRC and MINT countries right now. They have more potential than G7 nations and are likely to keep on expanding. There’s money to be made in these countries.

LINKS TO INFO: http://www.bbc.co.uk/news/magazine-25548060, http://www.telegraph.co.uk/finance/personalfinance/investing/10580108/How-to-invest-in-the-Mint-emerging-markets.html

Why is the US Stimulus Such A Big Deal for Financial Trading?

You cannot even open a financial newspaper these days without hearing about the withdrawal of the US stimulus package and what it means for emerging markets. This is why the Academy of Financial Trading wants to clear up just why the US stimulus is a big deal for online trading.

The US Stimulus Scheme is a monthly bond buying programme set in place by the US Federal Reserve; the US’ key organisation when it comes to national financial policy. The scheme was put in place in the wake of the 2008 global financial crisis, which hit the US particularly hard. It was designed to shore up their flailing economy.

However the US wasn’t the only country affected positively by the scheme. The nature of government bond buying, which is where governments borrow money from investors for projects and activities it needs to finance, meant that emerging economies were boosted to. This was because the scheme facilitated a greater flow of cash to said economies.

However we are not living in 2009 anymore. Last year saw several signs that indicate that the US economy is in recovery, US job creation was stronger than it’s been in a while, their housing market had finally started growing again etc.

This news prompted speculation that the stimulus would be withdrawn; after all what’s the point of borrowing money to fund government projects when you don’t need it? This had a very real effect on developing markets. Prices plummeted and currencies in countries such as Mexico, Brazil and India were all affected. This was only because of speculation and expectation.

Now the stimulus package has been somewhat withdrawn; the US has reduced the amount that it spends on bond buying on a monthly basis. Despite the gentle tapering back of the scheme, it will have a knock on effect on emerging markets and you need to know about it if you’re ever dealing with one of these markets.

It’s such a big deal because it affects how much money is coming into and going out of these countries. If there’s less money flowing means less to invest and less to spend. Less money means less growth, less opportunity. What you need to take away from this is that the withdrawal of the stimulus is something you need to know about if you hope to be successful at the moment in financial trading.

LINK TO INFO: http://www.investopedia.com/terms/b/bond.asp

An Education on the Emerging Power: China

When it comes to financial trading there are certain rules that you must abide by. You must always do your research; know what you’re getting into. This is one of the key rules. At the Academy of Financial Trading we believe that knowledge is power. You have to know about the company that you are investing in. You have to know about the commodity itself. Only then can you make an informed decision. Only then can you make a wise assessment. However you also need to know about the outside influences.

Markets aren’t just influenced by companies. They’re influenced by real world events. If something catastrophic happens, it will affect prices. Just look at the US government shutdown. Not only did it shave billions off the American economy, it drove prices down. It affected currency values. You need to be aware of the world around you. That is why you have to know about China.

Whilst the US is still the world’s largest economy, it isn’t the world’s fastest growing. That label belongs to the world’s second largest economy, China. Once upon a time China was seen as a nation stuck in the communist revolution of Chairman Mao. No longer. Ever since Mao’s successor opened up the nation to the west in the 1970’s, it has changed drastically. The ensuing decades saw the Chinese economy expand rapidly. It’s a juggernaut. These days you can’t walk down the street without seeing a product made in China. Chinese companies are investing more and more every day in international markets.

However they’ve always been somewhat restricted by their token adherence to communist principles, this is no longer the case. China has gradually been moving in the direction of free market economic principles. These are the principles we trade by in the west. This change was solidified this November. This came with the Third Plenum. This is the meeting where a new Chinese leader will announce the social and economic reforms that will mark their reign. This Third Plenum saw the announcement of sweeping free market reforms.

The key here is to watch China with an eye to the future. They are the world’s largest growing economy. They have just announced free market reforms. This suggests that this rate of growth is only going to increase.  Chinese companies are already coming to dominate industries. Chinese events are already affecting share prices across the board. It is likely that this role will only grow as the years pass. You have to know what happens in China. Your stock prices just may depend on it.