Several interesting statistics can be gleaned from the current performance of gold. For the past 5 years, gold has returned an average of -12.28%, but that number declines to -3% over the past 1 year. If we extrapolate within the last 6 months, gold has appreciated by 8.20%, and over the past 30 days the gold price has firmed by 8.96%. On Thursday, 11 February 2016 gold surged by 4.37% or an amount of $52.26. At the time of writing this article, gold bullion is trading at $1246.56 an ounce on the back of rising demand, loss of confidence in central banks and financial stocks, and rampant disregard for equities. While silver hardly has the same appeal as gold bullion, it too has tracked the precious metal and risen sharply over the past 30 days by 10.26% percent, and is now trading at $15.73 per ounce for a gain of 2.97% on the day. On the face of it, it is a clear case of call options on gold bullion as a binary option trade and a short-term investment.

Why are investors moving towards gold?

Gold is one of those commodities that is regarded as a safe-haven asset. When equities markets are undergoing turmoil, there is geopolitical uncertainty, and/or interest rates are low (or unlikely to rise) gold always gains favour. It is the go-to commodity for investors who seek stability. Gold does not generate any interest for its owners, and that is precisely why it fares poorly in an economy where interest rates are rising. Janet Yellen the chair of the Federal Reserve Bank recently wrapped up a 2-day meeting in Washington DC where she explained to Republican and Democrat lawmakers the Fed’s perception of the US economy and the global economy and how this would impact upon decisions taken by the Federal Reserve Bank. Yellen struck a dovish tone and alluded to the possibility that there would be no rate hike in March owing to China weakness, global stock market uncertainty and the general economic malaise that is racking financial stocks, industrial stocks and technology stocks. A part of Janet Yellen’s speech that confirms the uncertainty in the global economy and the US economy can be seen below: