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How to Trade Gold: Top Gold Trading Strategies and Tips
Gold trading strategy:
- Trading gold is much like trading forex if you use a spread-betting platform
- A gold trading strategy can include a mix of fundamental, sentimental, or technical analysis
- Advanced gold traders recognize that the yellow metal is priced in US Dollars and will account for its trend in their gold analysis
Why trade gold and what are the main trading strategies?
Once upon a time, trading gold was difficult: you had to buy and sell the metal itself. Then came futures and options, allowing traders to take positions without actually ending up with a safe full of bars, coins or jewelry. Gold exchange-traded funds (ETFs) made it easier still; trading gold was much like trading a stock.
Today, trading gold is almost no different from trading foreign exchange.
If a retail investor uses a spread-betting platform it is simply a matter of buying or selling depending on whether you think that the gold price is likely to rise or fall.
For some people, trading gold is attractive simply because the underlying asset is physical rather than a number in a bank account. There are a variety of strategies for trading gold ranging from studying the fundamental factors affecting supply and demand, studying current positioning of gold traders, to technical analysis and studying the gold price chart .
Even for those who rely principally on the fundamentals , many experienced traders would agree that a better gold trading strategy is incorpor ating some components of fundamental, sentiment, and technical analysis . A gold trading tip we offer is that fundamental and sentiment analysis can help you spot trends, but a study of the gold price chart and patterns can help you enter and exit specific trades.
Trading gold vs trading forex
Gold has traditionally been seen as a store of value, precisely because it is not subject to the whims of governments and central banks as currencies are. Gold prices are not influenced directly by either fiscal policy or monetary policy and will always be worth something – unlike a currency that can end up being almost worthless because, for example, of rampant inflation.
Gold can also be used by traders as a “safe haven”, along with assets like the Japanese Yen, the Swiss Franc and the notes and bonds issued by the US Treasury. That means that when traders are worried about risk trends they will tend to buy haven assets. On the flip side, traders tend to generally sell haven assets when risk appetite grows, opting instead for stocks and other currencies with a higher interest rate. This makes gold an important hedge against inflation and a valuable asset.
Note, though, that while it is possible to trade the Swiss Franc or the Japanese Yen against a variety of other currencies, gold is almost always traded against the US Dollar. Therefore, trading gold means you will need to take into account the movements of the US Dollar. For example, if the value of the US Dollar is increasing, that could drive the price of gold lower. Keep up to date with the US Dollar and key levels for gold in our gold market data page .
An additional factor to take into account when learning how to trade gold includes market liquidity. The World Gold Council estimates that average daily trading volumes in gold are higher than in any currency pairs other than EURUSD, USDJPY and GBPUSD. That makes it higher, for example, than the daily trading volume in EURJPY, so spreads – the differences between buying and selling prices – are narrow making gold relatively inexpensive to trade.
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Lastly, gold trading hours is nearly 24 hours per day. Gold exchanges are open almost all the time, with business moving seamlessly from London and Zurich to New York to Sydney and then to Hong Kong, Shanghai and Tokyo before Europe takes up the baton again. This means liquidity is high around the clock although, as with foreign exchange, it can be relatively quiet after the New York close, with lower volumes and therefore the possibility of volatile price movements.
How to trade gold using technical analysis
Technical traders will notice how the market condition of the gold price chart has changed over the years. Gold prices were in a sizeable trend from 2005 to 2020. Since 2020, gold prices have been trading in a defined range, changing hands between $1,000 and $1,400. In our DailyFX courses, we talk about matching your technical gold trading strategy to the market condition. If the market is trending, use a momentum strategy. If the gold chart is range bound, then use a low volatility or range strategy. This is a key ingredient in a gold trading strategy.
Gold Price Chart, Monthly Timeframe (June 2004 – June 2020)
For those who prefer to use technical analysis, the simplest way to start is by using previous highs and lows, trendlines and chart patterns. When the gold price is rising, a significant previous high above the current level will be an obvious target, as will an important previous low when the price is falling.
Also in an uptrend, a line on the chart connecting previous highs will act as resistance when above the current level, while a line connecting previous higher lows will act as support – with the reverse true in a falling market. As for chart patterns, those like head-and-shoulders tops and double bottoms are relevant just as they are when trading currency pairs.
For the more sophisticated technical trader, using Elliott Wave analysis , Fibonacci retracement levels , momentum indicators and other techniques can all help determine likely future moves
How to trade a symmetrical triangle pattern on the gold chart
Gold trading tips for beginners and advanced gold traders
Returning to fundamental analysis, the beginner needs to consider one point in particular: is market sentiment likely to be positive or negative ? If the former, then the gold price is likely to fall and if the latter it is likely to rise. This is therefore the simplest strategy to use when trading gold.
For the more advanced trader, though, it is important to consider too what is likely to happen to the Dollar. In recent years, the Dollar has become increasingly regarded as a safe haven as well, which explains in part why the gold price in Dollars has remained relatively stable. Thus if you think, for example, that the geopolitical situation is going to worsen, you might consider buying gold but at the same time selling, say, the Australian Dollar against its US counterpart.
An advanced trader will also want to keep an eye on the demand for gold jewelry. In India and China in particular, gold jewelry is still seen as an important long-term investment, it has its uses in industry too and central banks’ buying and selling of gold can also be important – all factors that can move the price.
As for supply, advanced traders will want to keep an eye on the output figures from the main producing companies such as Barrick Gold and Newmont Mining.
That said, all the rules of trading forex also apply to trading gold. Retail traders need to be careful not to over-leverage and to think about their risk management, setting targets, and stops in case something goes wrong.
Our principal gold trading tips are therefore:
- Consider whether the markets are in “risk on” or “risk off” mode;
- Look at the likely performance of the US Dollar as well as the gold price;
- Consider a mix of fundamental, sentimental, and technical analysis;
- Watch out for central bank buying or selling;
- Consider the demand for gold jewelry;
- Look at the industrial demand for gold;
- And take account of the supply position.
You might also be interested in.
- Trading the Gold-Silver Ratio: Strategies and Tips
- What is Gold? Understanding Gold as a Trader’s Commodity
Resources to help you trade the markets
Whether you are a new or an experienced trader, at DailyFX we have many resources to help you: analytical and educational webinars hosted several times per day, trading guides to help you improve your trading performance. You can l earn how to trade like an expert by reading our guide to the Traits of Successful Traders .
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
In today’s markets it is possible to make profits from trading commodities, such as gold without having to physically own the metal. Gold trading via CFD’s is based on opening a temporary order to buy or sell an exact amount of gold. The profit or loss is determined by the change in the price of gold during the contract duration.
Start trading Gold with AvaTrade and enjoy the benefits of trading with a regulated, award-winning broker!
At AvaTrade you can trade gold online, easily and effortlessly. Try gold trading with the leading regulated broker and enjoy the following benefits:
- Trade gold with competitive spreads
- Make larger trades with leverage of up to
- Trade on the powerful MetaTrader 4 or MetaTrader 5 platforms
- We allow trading forex and commodities on the same platform, so you can hedge your risks
- Trade whichever way you think the market will go – long or short
- Trade anytime with our unique app AvaTradeGO
- Get 24/5 live client support in your language
Gold Trading History
Since prehistoric times gold was one of the first metals to be mined, mainly because of the form in which it was found, being nuggets or small pieces at the bottom of a river. It became so high in demand that Egyptians started mining it in 2000 BC. Throughout history many civilizations chose gold as a reliable and universal form of money for trading goods.
The gold standard, the monetary system for which the economic currency used is backed up by the gold reserves of the issuing country. It came to exist, due to the recognition of gold as an actual currency. It was abandoned by the United Kingdom and the whole British Empire when World War I began. Most of the other countries also abandoned it during the 20 th century.
How to trade gold
- Open a trading account at Avatrade
- Fund your account to have a sufficient trading budget
- Choose the desired position size
- Select desired leverage
- Open a Long (buy) or Short (sell) position according to your analysis
Different forms of gold available to traders and investors:
Physical metal (bullions or coins) – A bullion is a grouping or bulk of precious metal. Measured in the form of a bar and weight.
Gold certificates – These are very similar to the first paper bank notes. Started in the 17 th century, these gold certificates acted as proof of gold ownership, and were passed like cash payments. Today they are still issued by certain banks, and represent a quantity of gold bullion or coins for its owner.
Gold futures – Is a contract agreement for the delivery of gold in the future at a set price. Investors use this to manage the price risk. Since gold futures contracts are traded at centralized exchanges, these contacts offer more leverage and flexibility than trading commodities themselves.
Gold-based ETFs – With the idea that gold continues to offer good returns, the ETF’s – exchange traded funds, are managed by gold trading experts. They can potentially give you a better chance to earn more, than if you were to trade it on your own. Keep in mind the price of gold still will continue to affect the ETF.
Contracts for difference – suitable for traders but not investors, this derivative allows to profit from the changes in gold price during the contract duration, without either a right or obligation to purchase the actual underlying asset. Nature of CFDs allows shorting gold and trading it on a margin.
- MT4 Symbol – GOLD
- Exchange – NYMEX
- Trading Hours – 23:00 – 21:59
- Increment: 0.01
- Minimum Trade Size: 1 ounce
Why Trade Gold with AvaTrade
You can join AvaTrade today for as little as and start gold and other precious metals trading. We pride ourselves in being a regulated and trusted broker worldwide for the past 11 years and are here to help you along the way.
You will get access to a range of educational tools, trading advantages and benefits that are exclusive to AvaTrade clients. We offer a range of trading platforms suitable for all level traders including automated trading solutions like Zulu Trade, as well as Autochartist and Guardian Angel add-ons. You are guaranteed to find the trading environment that suits your style.
Get started in gold trading with AvaTrade and enjoy the benefits of trading with a regulated, award-winning broker!
Gold Trading Online
Gold trading with AvaTrade is easy to understand, especially if you already have some experience of the forex market. Gold units are measured in Troy Ounces against a currency – usually the dollar – in a similar way to a Forex currency pair.
Gold Trading Influences and Gold Trading Strategy
Several distinct factors come into play when analysing the movement of the Gold price:
- Supply and demand – Most of the global demand comes from jewelry production and manufacturing (50%), and investment purposes (40%). Increased demand with low supply can mean a higher price, on the opposite end an oversupply, with weak demand can drive prices lower.
- Market sentiment – Political uncertainty and/or instability contributes to global growth uncertainty and does help in the rising prices of gold.
- Market volatility – Gold has often been used as a safe haven investment when markets are unpredictable.
- Currency movements – The US dollar is a strong influencer. When the dollar falls, commodity prices around the world increase. The US dollar and gold have an inverse relationship.
Overall if you are looking to an alternative investment arena, or a hedge – which is a reduced risk of price movements in any asset, then gold might be the right asset for you.
Please note that trading in this market involves risk like any other.
Here are a few tips for trading gold:
- Gold is compared to the yen since both assets fall into the category of a “safe haven instrument”, they tend to move in the same direction. Often, you can check your trade set ups by comparing the two.
- Focus on the price action and keep in mind that commodities can move more than currencies.
- The most popular Gold exchange rate is the XAU to USD rate. XAU is the trading terminal’s code for gold.
Are you ready to start trading gold today? Start trading the gold market with AvaTrade and enjoy the benefits of trading with a regulated, award-winning broker!
Discover the importance of the popular precious metal as a financial asset, and get tips on how to trade gold with IG.
Why is trading gold popular?
Gold has been the most highly desired of the world’s precious metals since ancient times, coveted for both its cultural and financial value.
It was integral to valuation of the world’s currencies well into the 20 th century, intrinsically linked to the price of the US dollar until the 1970s.
IG even took its original name – Investors’ Gold – from the metal, when in 1974 it was launched to offer clients the opportunity to trade gold on leverage rather than owning it outright. Trading gold is often popular as a form of insurance, as the metal is considered a safe haven in times of financial turbulence.