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Trading gold will never go out of fashion. In comparison with other financial instruments, it offers attractive stability and hedging against inflation. The price of gold is not affected by geopolitical factors that sway currency prices. That is why gold trading has been increasingly popular over the past few years. For people trading gold, this commodity offers a way to protect their investments, and ensure prolonged resistance to extreme market swings.
Adding gold to your portfolio is easy. When the markets are in turmoil, gold is a safe haven. Today, after COVID-19 shook the foundations of world economies, savvy traders invest in the metal to protect themselves against rising inflation.
So, What Makes Gold So Stable?
Its volume is massive and largely limited. It may not be changed in the same fashion as money is printed by central banks. Our tips will help you trade gold gold the most efficiently.
How to Trade Gold in 2022
Discover three ways to trade the commodity today. Take advantage of its full potential. Consider investing in gold using:
1. Options & Futures for Trading Gold
The most reliable ways to trade gold are also prohibitively expensive for many. You may trade gold options or futures through a major, regulated exchange. These securities are connected to physical gold. The main barrier to trading gold is an entry — you need at least $5000. The smallest contracts for gold futures are linked to 33 ounces, and margin requirements are tough. A gold futures contract is not an option for small-scale investors.
ETFs (exchange-traded funds) own gold and allow traders to buy or sell their shares. The price of stocks moves in line with the value of gold. Trading requires registering accounts with brokers that offer direct access to the stock exchange. There are commissions or spreads.
Someone buying one share in a fund like the SPDR Gold Trust spends an equivalent of 1/10 of the value of an ounce. Capital requirements for trading gold are outrageous. Unless you have at least $5000 to start, do not bother. Leverage is capped at 2 to 1.
3. Forex Brokers
One does not need to buy physical metal to invest in it. You can trade gold on forex like any currency. One of the most popular pairings is XAU/USD (gold against the US dollar).
A regulated broker will be your guide, and you can execute all trades online through a cutting-edge platform. Such systems provide access to news, indicators, charts, and gold Forex trading strategies so you can make measured decisions about your investment. You can program the terminal to receive Forex gold trading signals automatically.
Read articles, and take advantage of other educational resources and support for aspiring investors. Copy trading services allow delegation of decisions to experienced traders, and leverage increases clients’ buying power so you can trade gold in larger volumes. Open a demo account to learn and start trade on forex at your own pace. You can gain experience in fundamental analysis and technical analysis quickly. Finally, the size of the required deposit for easy Forex gold trading is small — just $100.
Tips for Successful Gold Forex Trading Strategies
As you can see, gold Forex trading is the most accessible option. There are many reasons to trade gold today. To build your trading strategy, consider these tips and tricks.
1. Pay Attention To New York Close
If you prefer day trading to holding, pay attention to timing. Forex gold trading is done 23 hours a day, 5 days a week. The CME Globex exchange is the central market; the highest liquidity is observed during the New York session. For those looking for a safe haven, a liquid asset with relatively low volatility, active trading during peak hours is advisable. If you want a bit more volatility, trade gold after the session closes. This allows execution of scalping strategies. Remember that risks in daily trading also rise.
2. Look at Highs and Lows
The pairing used in gold Forex trading tends to move in a range, not as a trend. There is no need for complex trading strategies for trending markets. Just focus on previous highs and lows to open positions in gold Forex trading. You may open a long position when the gold price is going up, and use the previous high as the bid price of gold.
This style of trading gold works because the metal is likely to return to those highs and lows in the future. Naturally, this may take time, so this system is hardly applicable to day trading. A ranging gold market does not offer opportunities for quick profits. Still, your risk is only moderate if you trade gold this way.
3. Consider Fundamentals
Currencies are susceptible to political or economic changes. In times of uncertainty, fundamental factors may cause extreme volatility, so instruments are difficult to trade. Meanwhile, commodities like crude oil are affected by supply and diplomatic tensions.
Meanwhile, gold Forex trading remains a stable safe haven. The yellow metal is correlated with the American currency, as well as the Japanese yen. When forex markets are erratic, you can still open a position with XAU/USD to protect your Investments.
4. Use the Symmetrical Triangle for Analysis
This is a plain type of chart patterns on trading platforms. It helps you identify breakouts. Combine it with technical indicators like liquidity or the relative strength index for effective Forex gold trading.
When these also point to a potential breakout, you have more confidence in your position. Place stop loss under the descending trend line following the convergence. Once the price of gold breaks out of the range, start shorting.
5. Monitor Demand
When the market demand rises, so does the price. The former may be driven by different industries that need gold to manufacture products — e.g., medical and tech companies. Consumers’ interest in jewellery may also push the gold prices up, as it has always been regarded as good for investment. Demand analysis is important for Forex gold trading.
6. Monitor Actions of Central Bank
The policy of the central bank is key for financial regulation in a country. When it anticipates greater volatility in the market, it buys gold as assets for hedge. For example, the central banks Russia and China have recently ramped up investment in gold. This move reflected their misgivings about the stability of majors.
In Forex gold trading, if a central bank is buying large volumes of gold, it shows two things. The governments have doubts about the stability of majors, and a rise in value is expected. When the metal is being bought in large amounts, the price of gold goes up. Traders may make a quick profit.
7. Monitor Real Interest Rates
Learn about the correlation between metal and real interest rates. When the rates grow, prices drop, and vice versa. Real interest rates are calculated as the nominal interest rate — the inflation rate. The outcome is gain or loss. Negative dynamics is favourable.
Usually, the metal starts appreciating when the rate falls below 1%. Traders may spot strong entry points for long positions. A rise of over 2% shows it is a good time to sell.
8. Use Moving Average Crossovers
The nature of the market also means that traders may employ different crossover trading strategies built around moving averages. Typically, they buy gold when a shorter-term ma (e.g., for 20 days) crosses above a longer-term ma (e.g., for 50 days).
The opposite logic works for selling. When a short-term MA falls below a long-term MA, this means that losses are likely to continue, and it is a good moment to sell. Incorporate this trick into your trading strategies.
You can use different moving averages as long as the gap is wide enough. For example, indicators for 10 and 20-day periods are not suitable. Instead, you may compare changes over 10 and 60 days.
9. Monitor Gold Production
Even though the demand for gold is still strong, production is hindered by high mining costs, as gold is found in places that are difficult to access. The most accessible reserve spots have already been explored and included in the supply. As reserves stay the same, rising demand drives will keep on driving gold prices up, particularly if big buyers continue investing in the precious metal. Thus, supply is unlikely to affect trading strategies.
The number of gold traders is growing all the time. There are many reasons why people choose gold. Many find it more predictable and reliable than other traded assets like forex or stock. One may trade gold daily, or hold on to this asset for years. Its price dynamics are easier to understand than political and economic controversies that affect forex trading. The rate of XAU/USD is stable, making it a safe haven for investment — provided you follow a sound trading strategy.
Through modern Forex platforms, a trader may track its movement at a glance. With a single tap, you can view price charts, receive news and Forex gold trading signals, check the economic calendar and use other tools. Add gold to your personal money management strategy, and join an enormous international group of investors. You can even install a terminal on your smartphone. This method is suitable for all investors.
If you decide to trade gold on forex, make sure the company is legit. Its support must be easy to contact, and all terms and conditions must be crystal clear. Check licensing details on the site, and customer reviews to see if the brand has fair practices.