- PPF Points
- 2,039
Forex, generally, has a smaller degree of volatility as compared to gold as it is stimulated by more extensive economic processes that are more stable while gold is linked with emotions and is volatile. Currencies, major pairs in particular, like the EUR/USD or the USD/JPY, are impacted by the decisions American or Asian banks make, interest rates, and economic statistics that change smoothly and are somewhat predictable. In contrast, gold acts mostly as a safe-haven asset. This is to say that the value of gold can drive upwards only in the event of market terror, like in the case of geopolitical conflicts, inflation fears, or stock tenders. Thus, the metal is much prone to price surges due to the fact that panic-driven consumers or distributors can really change the price within a short timeframe. It is also a fact that forex exhibits much higher liquidity than gold, due to that liquidity, price shocks are easily controlled. If there was economic or political instability in a major currency pair, a percentage move of 5% would be a rarity in a day, however, gold being a victim of public sentiment can go up and down by several percentage points in a few hours just because of the sentiment issue. In addition, governments and central banks are engaged in the process of currency stabilization through their interventions or by monetary policy, and that limits the situation preventing any violent and disorderly market. The same level of control is not exercised over the gold market though. Although forex and gold propose money-making prospects for investors, forex, in particular, is a bit slower-paced as it is not as fluctuating as the gold market, causing it to become the favorite environment of many traders who prefer stable, predictable trading.
