Gold is an invaluable product and is among those highly coveted metals with a status symbol. Whereas the metal’s main use is in the aesthetics and jewelry manufacturing industries, it plays a more significant role in the financial markets. In contrast with most precious metals, gold is famous for its storing value in financial markets. As such, gold trading has become a lucrative venture for the majority of those in the capital markets.
Only a handful of people with considerable finances could access the trading systems for this precious metal in the past. However, the spread of internet connectivity virtually in every corner of the world has made it possible for anyone to access these systems. Nowadays, anyone can trade the coveted product instead of purchasing it for other reasons.
The Trading Options
In the capital markets, the trading of currency pairs and gold is similar. The traders can leverage the changes in prices during the day.
Contract of Difference (CFDs)
Trading of this commodity is guided by retail forex brokers through Contract of Difference (CFDs). Traders can speculate the gold price without owning any physical gold, thanks to CFDs. The traders can also get into an extended position, implying a wager that the gold price will increase. On the contrary, CFDs enable traders to enter a short term position, which involves betting on lower prices. CFDs relieve the traders of having to pay for roll futures or gold storage. Nonetheless, they are financial instruments that bear high risks, given the market volatility.
Other than trading gold using CFDs, you could choose a day trading alternative, futures, or ETF. Similar to CFDs, the techniques do not entail holding the physical metal and searching for potential customers. Gold futures and ETFs enable traders to acquire exposure for the product in the same way you could perform currency pair trading in the foreign exchange market. Traders can bet on the estimated gold prices via the acquisition of exchange-traded deals using futures.
Gold futures provide a leveraged means of trading gold, which means that a trader only needs a little capital. The capital is deposited into the trading account of their broker, after which large trading volumes can be made.
Analyzing the Market
Market analysis is a crucial aspect incorporated during the trading process of this invaluable, precious metal. Any retail trader must master this section before trading the coveted metal. In this case, the analysis includes fundamentals that could impact price movements in any direction while keenly observing historical information. A few of the fundamentals linked to having an impact on gold prices revolve around demand and supply forces.
Increased supply in relation to demand often leads to lower prices. On the other hand, a supply decrease connected with an increase in demand sparks off an increase in gold prices. Whenever there are increasing concerns regarding recession or international economic slowdown, the prices of gold go up as traders focus on the coveted metal as a value storage alternative. During geopolitical uncertainties and tensions, gold is a haven for wealth storage.
Another way of understanding how to best trade gold is through technical analysis. It is essentially utilizing trading tools and historical information to confirm the expected direction of the gold prices. Through technical analysis, technical traders can recognize oversold and overbought conditions. Such conditions come in handy as they provide indicators for entering sell or buy positions.
What to Remember
There exists a direct relationship between gold prices and the Japanese Yen. When Yen increases, it is normal for this commodity’s prices to follow in the same direction. In the same vein, a decline in gold prices means a fall in the Japanese Yen currency. The direct relation can be explained by the fact that the two function as safe havens for value storage during unpredictable moments.
The U.S. dollar also correlates with gold prices. Unlike the Japanese Yen, the valuable metal has an indirect relation to the dollar. When the dollar is performing well in the markets, gold prices depreciate. The reverse is also true. As for the purchase size, remember to tread carefully when trading gold, mainly when it comes to your exposure level.While significant trading levels are a reliable way of getting your profits quicker, it can also prove disastrous when you begin accumulating losses. An asset assignment of above 15% committed to valuable metals may lose higher returns provided by other property classes.
*** BEST STOCK NEWSLETTER of 2020 ALERT ***
Updated September 13, 2020
At WallStreetSurvivor, we subscribe to dozens stock recommendation and advisory newsletters. There is ONE newsletter that is constantly outperforming all of the others–The Motley Fool Stock Advisor.
ONE of this year’s Motley Fool Stock Picks Has Already quadrupled, ONE has tripled, and another TWO Have Already Doubled in just 8 months of of 2020!
We have been tracking ALL of the Motley Fool stock picks since January 2016. That’s almost 5 years, 55 months and 110 stock picks. As of Friday, September 11, 2020 the Motley Fool’s January 2 stock pick (TSLA) is up 333%, their March 19th pick (ZM) is up 209% in just 6 months, and another two have more than doubled. In addition, 6 of their 2019, 8 of their 2018, 8 of their 2016, 9 of theire 2017 and 13 of their 2016 picks have also doubled. Most impressively, over the last 5 years that we have been tracking every recommendation, their average stock pick is up 135%. That beats the SP500 by an average of 95%. And that’s even accounting for all of this COVID mess that has wreaked havoc on most stocks. BUT, the Fool has done so well because they have quickly identified stocks this year that will perform well in the post-COVID world. THAT is how the Fool consistently does so well–they adapt and constantly pick stocks before everyone else realizes the opportunities.
- CrowdStrike (CRWD) — June 4, 2020 pick is already up 32%
- Shopify (SHOP) – April 2, 2020 pick and it is already up 164%
- Zoom Video (ZM) – March 19, 2020 pick and it is already up 209%
- DexCom (DXCM) picked Feb 20, 2020 right before the market crashed and it is still up 41%
- Tesla (TSLA) picked January 2, 2020 before the crash and it is up 333%
- HubSpot (HUBS) picked December 5, 2019 and it is up 82%
- Netflix (NFLX) picked November 21, 2019 and it is up 54%
- Trade Desk (TTD) picked November 11, 2019 and up 117%
- Zoom Video originally picked Oct 3 and it is up 398%
- SolarEdge (SEDG) picked September 19, 2019 and it is up 105%
Now no one can guarantee that their next picks will be as strong, but our 5 years of experience has been super-profitable. They also claim that since inception, their average pick is up 529% and now we believe them. You sure don’t want to risk missing out. Many analysts are saying that we have passed the bottom of this COVID crisis and stocks will recover quickly. So make sure you have the best stocks in your portfolio.
Normally the Fool service is priced at $199 per year but they are currently offering it for a NEW SUBSCRIBER DISCOUNT of just $99/year if you click this link.
GET UP TO $1,000 IN FREE STOCK
WHEN YOU OPEN A ROBINHOOD BROKERAGE ACCOUNT
Robinhood was the first brokerage site to NOT charge commissions when they opened in 2013. They just past 10,000,000 accounts and to celebrate they are offering up to $1,000 in free stock when you open a new account.
Here’s the details: You must click on a special promo link to open your new Robinhood account. Then when you fund your account with at least $10, you will receive one stock valued between $5 and $500. Then, you will get a link to share with your friends. Every time one of your friends opens an account, you will receive another free stock valued between $5 and $500. Click here to learn more about this Special Robinhood offer.
Claim your free stock NOW (before it’s too late)