Gold Trading Strategy – The In-depth Strategy

  • By: Joseph Benson
  • Time to read: 6 min.

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Gold trading strategy, spread-betting platforms make trading gold similar to forex trading. A combination of sentimental, technical, and fundamental analysis can be used to create a gold trading strategy. Advanced gold traders know that yellow metal prices are in US Dollars. They will take into account this trend in their gold analysis

What are the main trading strategies and why trade gold?

Trading gold used to be difficult. You had to purchase and sell the metal. Futures and options were introduced, which allowed traders to trade without having to own gold bars, coins, or jewelry. 

Trading gold exchange-traded funds, or ETFs (gold) was easier than ever; it was almost like trading stock. Trading gold today is very similar to trading foreign currency.

Spread-betting platforms allow retail investors to simply buy or sell gold depending on their expectations of the price rising or falling.

Trading gold is appealing to some because it is a physical asset and not a number in a bank. Trading gold is possible using a variety strategies.

These include studying fundamental factors that affect supply and demand, current position of gold traders, technical analysis, and studying the price chart.

Even for traders who are primarily reliant on the fundamentals and sentiment analysis, most experienced traders agree that a more profitable strategy for trading gold is one that incorporates some elements of technical, fundamental and sentiment analysis.

We offer a gold trading tip: While sentiment and fundamental analysis can help spot trends, a look at the gold price chart can show you patterns that can be used to help you exit and enter specific trades.

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Gold Trading Strategy

Trading gold vs trading forex

Because gold is not subject to the same whims as currencies, it has been considered a store-of-value. Prices of gold are not affected by monetary or fiscal policy. They will always be worth something, unlike currencies that may become almost worthless due to rampant inflation.

Gold, along with assets such as the Japanese Yen and Swiss Franc, can be used by traders to provide a “safe haven”. They also have the option of using notes and bonds from the US Treasury and notes.

This means that traders will buy assets with low risk tendencies when they are concerned about risks. Contrarily, traders will tend to sell haven assets as their risk appetite increases and opt for stocks or other currencies that offer a higher rate of interest. This makes gold a valuable asset and an important hedge against inflation.

It is possible to trade the Swiss Franc and the Japanese Yen against a range of currencies, but gold is almost always traded against US dollars. Trading gold will require you to consider the US Dollar’s movements.

If the US Dollar’s value increases, it could cause gold prices to drop. Stay up-to-date with the US Dollar’s value and key levels of gold in our market data page.

Market liquidity is another factor that you should consider when learning how trade gold. According to the World Gold Council, gold’s average daily trading volume is higher than any other currency pair except USDJPY, EURUSD and GBPUSD.

This makes it more expensive to trade gold than, for instance, the daily trading volume of EURJPY. Spreads, which are the differences between selling and buying prices, are also higher than in EURJPY.

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Finally, the hours of gold trading are almost 24 hours per day. The gold exchanges are open nearly every day. Business moves seamlessly from London and Zurich, New York, Sydney, Hong Kong, Shanghai, Tokyo, and then on to Hong Kong, Shanghai, and Tokyo.

Although liquidity is available 24 hours a day, this also means that prices can fluctuate and volumes may be lower after New York closes.

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Gold Trading Strategy

How to trade gold using technical analysis?

Technical traders will be able to see how the gold market conditions have changed over time. From 2005 to 2015, gold prices showed a significant trend. Gold prices have traded in a narrow range since 2015, fluctuating between $1,000 and $1,000.

Our Daily courses discuss matching your technical trading strategy for gold to market conditions. Use a momentum strategy if the market is trending. Use a range or low volatility strategy if the gold chart is not range bound. This is an important component of a gold trading strategy.

Gold price chart monthly timeframe June 2004 – June 2018

If you prefer technical analysis, it is easier to use trend lines, previous highs and lowers, and chart patterns. A significant previous high will be a target when gold prices are rising. However, it will also be a target when prices are falling.

In an uptrend, the line connecting the previous highs on the chart will serve as resistance if the current level is higher than it, and the line connecting the previous lower lows will serve as support in a falling market. 

Chart patterns such as double bottoms and head-and-shoulders tops are just as relevant when trading currency pairs. Technical traders who are more experienced can use Elliott Wave analysis.

Fibonacci Retracement levels, momentum indicators, and other techniques to help predict future moves. How to trade the symmetrical triangular pattern on a gold chart

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Gold Trading Strategy

Gold trading tips – Beginners and advanced

To return to the fundamental analysis, the beginner must consider one thing: Is market sentiment likely be positive? If the former, the gold price will likely fall while if it rises, the latter is more likely. This strategy is the most straightforward to use when trading in gold.

It is crucial to think about what the future holds for the Dollar, even if you are a more experienced trader. The Dollar has been increasingly considered a safe haven in recent years. This is partly why the gold price in Dollars remains relatively stable.

If you believe that geopolitical conditions are going to get worse, you might think about buying gold and selling the Australian dollar in exchange. Advanced traders will want to monitor the demand for gold jewelry. 

Gold jewelry, especially in India and China, is still considered a long-term investment. It can be used in industry and central banks can buy and sell gold. These factors can all affect the price.

Advanced traders should pay attention to the supply figures of the major producing companies like Newmont Mining and Barrick Gold.

All the rules for trading forex apply to trading gold. Retail traders must be cautious not to over-leverage, think about risk management, set targets and stop in the event of an error.

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These are our principal tips for trading gold:

  • Take into account whether the markets are in “risk-on” or “risk-off” mode.
  • Take a look at the US Dollar’s likely performance and the gold price.
  • You might consider a combination of sentimental, technical, and fundamental analysis.
  • Be on the lookout for central bank selling or buying;
  • Take into account the high demand for gold jewelry
  • Take a look at the demand for gold in industry.
  • Also, take into account the supply situation.

Over the years we have seen gold trading to be very profitable! I do hope you find this article very hopeful.

Gold Trading Strategy

Conclusion

Gold trading strategy is a plan that you can follow to help you make profits in the gold market. A good gold trading strategy can help you to avoid some of the pitfalls that newbie traders often fall into and can also help you to avoid emotional decisions that could cost you money.

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There are many different types of gold trading strategies, but they all have one thing in common – they require patience and discipline.

A good gold trading strategy should be something that can be followed by anyone, regardless of their level of experience or expertise.

If you are looking for a way to make money from the gold market, then following a simple and consistent approach could be your best bet. Here are some tips on how to develop a profitable gold trading strategy:

Choose an Asset Class That You Understand

Before deciding which type of asset class to trade, it’s important that you understand what each one involves and how it works. This will enable you to make informed decisions when it comes time to make trades.

For example, if you don’t understand how commodities work then it may not be wise for you to trade them just yet; instead, consider focusing on stocks or commodities futures instead until you have more experience under your belt!

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