The market structure in the gold market is seeing an unprecedented surge of change. This is the result of the emerging demand patterns of gold along with the regulatory changes. It is also the result of the innovations as well as the involvement of new types of participants. It is the response of the individual gold market centers to such opportunities along with the potential threats that will eventually determine the shape of the gold trading landscape. Over the next decade, you can expect to see a lot of change in the trend as well as in the market features of the gold transaction.
Know The Shift
From east to west, the gold market has seen paradigm shift meeting with the global gold demand in the recent years. Moreover, businesses are now investing more on all stages of production to fabrication and refining to retain the value. This reflects the appetite of a country in playing a more significant role in gold trading as well as in its production volume and pricing. There has also been a noticeable shift in the market infrastructure as well as in the gold exchange. All this has benefited all the gold producing and consuming nations all over the world.
The Regulatory Change
After the financial crisis, the financial markets have introduced new regulations and most of these are aimed at refining the resilience of the system. This has resulted in the increase in the capitalization of banks, market transparency and even helped in addressing all of the systemic risks involved in it. However, most of these new regulations are applicable across the asset classes and it not uniquely related to gold. The regulatory direction may be consistent all over the globe but there are natural differences in its implementation from one region and jurisdiction to another. Therefore, these regulations on NYC gold buyers have levied costs on the market participants.
Few Unintended Consequences
These regulations have had a few unintended consequences on current trend in gold rate and have also resulted in the reduction in market liquidity. In order to stabilize and have full impact on the gold market these regulations may need a couple of years more. It is only then the gold market structure will become clear. Exchange trading is another aspect that has impacted due to these regulations partially due to the function. There is a noticeable shift across the OTC markets and the asset classes leading to the transparent trading on exchanges.
New Participants And Technologies
New participants and incorporation of new technologies have also influenced the gold prices meaningfully. Ideally, it is the banks that are responsible somehow for such participation from newer players in the gold market. Banks have always played a leading role in the gold market with it financing functions and facilitation of the risk transfer. In the recent times, banks have also retrenched markets with its capital constraints, cyclical considerations and market consolidation. As a result, the non-bank players such as hedge funds, high-frequency trading firms and algorithmic traders have become important providers of liquidity and influence the price discovery.