Gold is one of the most popular trading instruments you can find. In 2021, it had an estimated daily trading volume of $130 billion. The benefit of having a highly liquid trading instrument is its low spread. This ensures that traders can make significant transactions without disrupting the market.
Gold is also a good instrument for diversifying your portfolio. This fact made it a must-have for billionaire investors like Ray Dialo and Naguib Sawiris.
These billionaires are heavily invested in Gold and have seen huge profits in previous years. Want to join their ranks? Then go through this article to learn about their top Gold investment strategies!
Gold trading strategies are rules that help traders decide when to enter a trade, how to manage it, and when to close it. It can be complex or straightforward and varies depending on what the trader wants. Using a tried and tested strategy for Gold transactions is possible, but it wouldn't work in all cases.
For example, a range trading strategy works well for currency pairs but would be bad for Gold trading. That's because the strategy functions well with lower volatility than what Gold offers.
If you're looking to have a successful Gold investment outing, use these three strategies:
When trading Gold, you should know the factor influencing its prices. Here are some things to look out for →
Gold gives investors financial security. As such, you can expect its prices to rise during global tension. For instance, the war in Ukraine directly impacted the price of Gold.
Investors turn to Gold when they worry about rising inflation. This is because Gold's value appreciates while cash becomes a liability.
Gold and the U.S. dollar have an inverse relationship. This means the value of Gold drops when the dollar performs well. Moreover, Gold prices rise when the U.S. dollar rate decreases. Understanding this situation will let you know the best investment periods.
Physical supply and demand
It's become more popular to buy Gold ETFs or trade Gold CFDs and futures. That said, industries still use physical Gold in jewelry production. As a result, the demand for such items as coins and Gold bars will influence the market and Gold prices.
Random events don't always influence the Gold price. News trading happens when traders make investments based on scheduled financial events. These could be economic data releases and central bank meetings. The outcomes of these events have a significant impact on the Gold price.
This strategy focuses on making decisions based on price movements. Traders can use multiple price action strategies. These could be breakouts, reversals, or simple and advanced candlestick patterns.
This strategy's primary advantage is its possible use across different timeframes. For example, a day trader might trade a breakout in Gold on the M15 chart. But, a swing trader could place a trade on a breakout on an H4 chart.
There are many indicators to help you track and predict Gold price movements. You can choose from any of these:
This tool lets you know when Gold is overbought or oversold. If the RSI drops below 30, the commodity has been oversold. If the value stays above 70, it has been overbought.
The RSI is excellent for filtering trading signals. This ensures you only get calls that align with your chosen strategy. Then, based on the signal's value on the indicator, you can know when to make a trade or hold off on your purchase.
Moving averages are used to predict the market's direction. You can also use them to generate entry/exit signals. This case has fast-moving (10) and slow-moving (20) averages.
You can plot either one on the hourly chart. Once the 10 M.A. goes above the 20 M.A., a buy signal is generated. If it goes below 20 M.A., it creates a sell signal.
These are a set of three lines that represents Gold's volatility. It has two outer lines that show the upper and lower levels of the price movement. This is where you can expect Gold to be traded 90% of the time.
The middle line shows real-time price action. It fluctuates throughout the day between the outer bands. When the bands shrink, it means Gold is highly volatile. When they expand, the commodity experiences low volatility.
If you're determined to use your Gold assets to maximize profit, keep these trading tips in mind:
The Gold market is open most of the day, but peak liquidity happens during New York trading hours. Based on your goals, you can target trades during or after this period. This is because it offers high liquidity and low volatility.
Gold trades in a range, so it's easy to buy and sell opportunities. These can be found within the highs and lows of the previous trading pair. You can open a trade position when Gold trends upwards and target a last high - this becomes your selling price. You can also target a previous low when Gold trends downward to find your buying price.
Gold can be a safety net in periods of political uncertainty. A good example is the ongoing Russo-Ukrainian war. Keeping track of these situations lets you safeguard your assets without them dropping in value. In addition, you can also protect your assets from unpredictable forex market situations.
This chart pattern indicates a period of consolidation leading to a price breakout. It features a meeting point of two trend lines moving up on a similar slope. But the lines are going in opposite directions. While this happens, the Gold price movement gets tighter. This creates a trading opportunity.
Most traders use the symmetrical triangle alongside other tools. These include the relative strength indicator. When the indicator suggests a price, the triangle confirms its findings.
You can also add a stop-loss order below the descending trend line when both lines have met. A sell order can follow this if the Gold price breaks out successfully.
The demand for Gold comes in many forms. First, specific industries can increase Gold acquisitions, which may be due to more production of consumer products. For example, the consumer demand for Gold jewelry can affect the commodity's price.
You'll need to consider the global Forex Market demand. This is where Gold jewelry is a luxury good and an investment asset.
Central banks buy Gold as an inflation hedge. This happens when they expect certain currencies to become volatile. For example, China and Russia made huge Gold investments in 2020. Their concern was for the future price of major global currencies like the U.S. dollar and euro.
You can learn two lessons from central banks buying vast amounts of Gold. First, it shows governments are operating based on a potential drop in currency value. This means you should move a more significant percentage of your investments into stable funds.
Secondly, central bank buying leads to a short-term increase in the Gold price. When the price starts trending upward, you can use the opportunity to make a quick profit.
Gold has a strong relationship with actual interest rates. The commodity's prices rise when the interest rates fall and vice versa. You can calculate the real interest rate by subtracting the inflation rate from the nominal interest rate resulting in a percentage gain or loss.
You can also identify substantial buying opportunities by closely watching interest rate changes. This is a win if you're long-term Gold profit. However, it would be best to keep in mind that a real interest rate above 2% will deflate the Gold value. Therefore, it would be best if you sold before it reached this point.
The Gold demand keeps increasing, leading to an increase in mining operations. But, Gold mining has become more expensive because it's challenging to access underground reserves.
The most accessible Gold reserves have been mined and placed into the global supply. However, other areas are expensive to reach. This reduces the profit potential for mining businesses. But limited production doesn't mean Gold is heading for a decline. On the contrary, stable Gold production can squeeze global demand. This will lead to higher prices if central banks and other buyers are interested in the asset.
Gold investment is a top lucrative venture in which many billionaires are involved. You can have profitable Gold trading sessions with strategies and tips we've covered. The indicators can also tell you the best market periods to buy or sell the commodity.
To get started, visit the ISA Bullion platform. We can give you access to live rates and trading information on the Gold page.
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