Gold hovered within striking distance of the $4,500-an-ounce mark on Tuesday, buoyed by expectations of looser U.S. monetary policy and lingering geopolitical tensions that have driven the prices to a run of record highs.
Bullion, a classic safe-haven during periods of economic and political uncertainty, touched a record $4,497.55 earlier in the session.
The yellow metal has vaulted more than 70% so far this year, its biggest annual rise since 1979, driven by a mix of safe-haven demand, bets on U.S. rate cuts, robust central-bank buying, de-dollarisation trends and ETF buying.
Large buyers and institutional investors usually buy gold from big banks. Prices in the spot market are determined by real-time supply and demand dynamics. London is the most influential hub for the spot gold market, largely because of the London Bullion Market Association.
The association sets standards for gold trading and provides a framework for the over-the-counter market, facilitating trades among banks, dealers, and institutions. China, India, the Middle East and the United States are other major gold trading centres.
Investors can also get exposure to gold via futures exchanges, where people buy or sell a particular commodity at a fixed price on a particular date in the future.
COMEX (Commodity Exchange Inc), part of the New York Mercantile Exchange, is the largest gold futures market in terms of trading volumes. The Shanghai Futures Exchange, China's leading commodities exchange, also offers gold futures contracts.
The Tokyo Commodity Exchange, popularly known as TOCOM, is another big player in the Asian gold market.
Exchange-traded products or exchange-traded funds issue securities backed by physical metal and allow people to gain exposure to gold prices without taking delivery of the metal itself.
Exchange-traded funds have become a major category of investment demand for the precious metal. Inflows into physically backed gold exchange-traded funds totalled $64 billion year-to-date as of October, according to World Gold Council data, with a record $17.3 billion added in September alone.
Retail consumers can buy gold from metals traders selling bars and coins in a shop or online. Gold bars and coins are both effective means of investing in physical gold.
Rising interest from investment funds in recent years has been a major factor behind bullion's price moves. Sentiment driven by market trends, news, and global events can fuel speculative buying or selling of gold.
Gold is a popular hedge against currency market volatility. It has traditionally moved in the opposite direction to the U.S. dollar, since weakness in the U.S. currency makes dollar-priced gold cheaper for holders of other currencies and vice versa.
The precious metal is widely considered a safe haven during times of uncertainty. U.S. President Donald Trump's trade tariffs and his imposition of additional duties on Chinese goods have sparked a global trade war, rattling currency markets and sparking fears of a spike in U.S. inflation.
