Forex

Gold Trading Strategies and Tips: How to Trade Gold?

Gold Trading Strategies and Tips: How to Trade Gold?

Gold is one of the most traded commodities in the world and over the centuries has become the most traded asset in history. XAU/USD is one of a number of gold pairings Forex brokers now offer, making it easier than ever to incorporate gold as part of your Forex trading strategy

Different ways of  Gold Trading

#Physical metal

Investors can purchase actual physical metal, either as gold bars, gold bullion, or even through jewelry that can be worn decoratively, but later melted down and sold as raw gold.

#Gold certificates

Gold certificates are a certificate proving ownership of gold, issued by another entity storing the gold owned by the investor. Many years ago, gold certificates were used as paper currency in the United States.

#Gold futures

gold future scaled

Gold futures are contracts that essentially bet on a change in the future price of gold. These futures contracts often come with expensive fees that can eat into the profits of traders.

#Gold-Based ETFs

For those investors looking to gain exposure to gold without owning the underlying asset, may opt to invest in a gold-based ETF or exchange-traded fund.

#Contracts For Difference

Contracts for difference, or CFDs, one of the better options for traders who want to gain exposure to gold markets. CFDs can be executed faster than other financial instrument types.

 

Gold Trading Strategies and Tips

#Trade with the New York Close in Mind

Gold is a nearly 24-hour market, but peak liquidity is typically found during New York trading hours. Whether you should target trades during or after New York trading hours depends on your goals. 

Whereas trades during peak activity offer high liquidity and low volatility, making them good targets for safe-haven positions, off-hours trading can provide the extra volatility needed to execute scalping strategies. At the same time, this extra volatility increases the relative risk of any trade.

#Use the Right Broker

right broker scaled

The best gold trading websites offer reliable charting software. Trading gold on MetaTrader 4 (MT4) is particularly popular.

But regardless of the system you chose, your software will need easy-to-follow price charts and signals. Any additional free tools so that data, symbols, and patterns are explained will also help. Essentially, the best brokers help inform your predictions and market outlook. Keep an eye out for extra learning resources that offer details of alternative gold trading methods too.

#Consider Geopolitical Implications

When political or economic uncertainty creates concerns about currency prices, gold can be a stable safe haven that protects your liquid assets. 

Gold tends to be strongly correlated to the U.S. dollar, as well as other stable currencies such as Japan’s yen, and opening a position with XAU/USD can be a reliable means of protecting your assets from unpredictable situations affecting other forex markets.

#Short-Term Strategy

For short-term traders, a classic way to try to profit from the frequent trends in gold is to use a moving average crossover strategy. In this strategy, a trader would look to buy gold if a shorter-term moving average crossed above a longer-term moving average and sell when the shorter-term moving average crosses below the longer-term average.

#Long-Term Strategy

Longer-term position traders and investors can focus more on the fundamentals that drive gold’s price, such as the level of real interest rates. The chart below shows the relationship between gold prices and the yield on TIPS, a proxy for real interest rates in the United States.

#Read the Long-Term Chart

Take time to learn the gold chart inside and out, starting with a long-term history that goes back at least 100 years. Looking at different timescale will help in identifying longer and shorter-term trends and check on consolidation. 

#Supply and Demand

Volume per day data shows half of the global demand is driven by jewelry production. Another 40% represents investment accounts. Take a look at price charts and you’ll see that when demand is up and supply is down price rises. In contrast, if supply increases and demand drops, live price rates will fall.

If you can effectively analyze gold’s price movements and develop a trading strategy to capitalize on this opportunity, gold trading can be a reliable safe haven for investment.

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