Whether it’s behaving like a bull or bear, gold is one of the most preferred trading options offering high liquidity and inflation-beating capacity. Due to its unique position within the world’s economy, it provides excellent opportunities to profit in all environments.
Whenever the market faces turbulence, gold prices will also shoot up. Sometimes markets also witness a fall in gold prices, but it won’t last long and always makes a strong comeback. Want to learn how to trade in gold? I’m sure you do. There is no rocket science behind trading in this yellow metal.
You only require some skillsets unique to this commodity. You’ll find many platforms like the Golden Profit app that’ll help you in profitable gold trading. If you want to make a start, we provide four easy steps to get started.
Why should you trade in gold?
Three main criteria every risk-averse trader looks for before trading is safety, liquidity and opportunities to profit.
And this yellow metal meets all these criteria without any hiccups. Below, we’ll show you two key points why you should trade in gold.
- It offers high liquidity and excellent opportunities to profit. Due to its unique position within the world’s economic system, gold provides incredible leverage with measured risk.
- Gold has an inverse relationship with equity investment. That means the gold will be performing well if the equity market goes down. Considering gold as your long-term investment will create a buffer to the overall volatility of your portfolio.
So, if you’re looking to add gold to your long-term investment options, keep reading the article.
4 Easy steps for trading in gold
In this section, we’ll cover three easy steps to kickstart trading in gold.
1. What moves gold
This yellow metal embedded itself into the psyche of the financial world. As one of the oldest currencies in the world, gold itself reacts only to a limited number of price catalysts.
However, each of the forces splits into two parts: greed and fear, inflation and deflation, supply and demand.
Whenever the traders trade gold in reaction to one of these polarities, they will face an elevated risk. For example, gold hitting the world financial markets.
Many traders believe the emotional crowd will blindly carry prices higher, so they fear moving the gold and jump in.
However, inflation attracts a more technical crowd that can sell against the gold rally aggressively.
Combinations of these polarities always play a vital role in world markets. It will establish long-term themes tracking uptrends and downtrends equally.
Because traders focus on high fear levels coming out of the economic collapse, the Federal Reserve FOMC has little impact on gold.
And further, this quantitative easing will increase deflation and set up the gold market for a significant reversal.
2. Understand the crowd
With diverse and often opposing interests, gold attracted numerous crowds.
Collecting physical bullion and allocating an outsized portion of family assets to gold equities, this yellow metal is standing at the top of the heap.
The crown consists of long-term players who shake out more minor ideological players.
Additionally, with a few funds devoted entirely to the long side of the gold, retail participants comprise the entire population of gold bugs.
While keeping a floor under features and gold stocks, gold bugs add enormous liquidity.
And together, these bugs also provide a continuous supply of buying interest at lower prices.
3. Read the long-term chart
Starting with a long-term history, make sure to learn the gold chart inside and out.
However, gold also trickled lower for extended periods denying profits to gold bugs to craving out trends.
The gold chart will help you analyse price levels that need to be watched whenever the gold returns to test them.
Recently, gold shows little movement while following the removal of the gold standard for the dollar.
Due to skyrocketing crude oil, it took off in a long uptrend and underpinned by increasing inflation.
4. Choose your Venue
As I mentioned earlier, gold offers high liquidity. It increases when it’s moving sharply higher or lower and decreases during quiet periods.
And these oscillations impact the equity markets to a lower degree than it does future markets.
However, this equation didn’t improve even with new products offered by Chicago’s CME group.
The 100-oz contract, a 50-oz mini contract and a 10-oz micro contract are three gold futures offered by CME.
The more minor contracts widely traded 87,450 for the mini contract and .05 million for the micro contract.
However, it doesn’t impact long-dated futures but affects the trade execution in short-term positions.
Hopefully, the four steps given above in the article will help you trade in the gold market profitably. You only have to learn how three polarities can impact the majority of gold buying and selling decisions.
Then familiarize yourself with the diverse crowds that focus on gold trading and hedging. Finally, analyse the long-term and short-term gold chart and choose your venue for risk-taking.