How to trade gold: Instruction for beginners (Part 6)

The value of gold depends on many factors. Among them:

Central banks' gold reserves.
Gold is part of the reserves of many nations. Authorities can influence the value of this asset by buying it or selling it.

Demand for gold jewelry.
Take, for example, China or India, where there is huge consumer demand. This may also have an impact on prices. In addition, some investors see gold jewelry as a means of preserving value. If the demand for jewelry goes up, the price of gold will move with it.

The hot money effect.
The value of gold also depends on monetary policy. As a rule, the price of this precious metal goes up during quantitative easing programs. The hot money effect has a positive effect on the price of gold.

Technical analysis and speculative trends.
Both short-term fluctuations and long-term trends can affect the price of gold. Traders monitor central bank decisions, economic reports, and important market news. The price of gold can also be influenced by speculative trends (e.g., deflation/inflation fears).

Technical analysis - forecasting price changes through:

• Support and resistance levels;
• Moving averages;
• Fibonacci sequences.

Technical analysis can make trading decisions and earn profits by trading gold when applied correctly.

Many gold trading strategies can bring profit. Let us have a closer look at them:

Buy and hold. In this strategy, which is considered long-term, the trader buys gold and keeps it for some time. The main objective is to sell the asset at a higher value than it was purchased;

Gold mining stocks. This strategy refers to the long-term. The peculiarity is an investment not in physical gold, but securities. The profit comes from the increase in capital of companies and dividends;

Daytrading. A short-term strategy follows in which the user purchases gold and sells it within one trading session. The goal is to get the difference in the price;

Swing trading. This strategy refers to a medium-term strategy in which the depositor buys gold and keeps it for several weeks or days in the hope of gaining the difference in price between buying and selling;

ETF/ETN with leverage. This strategy refers to a short-term strategy where the trader uses borrowed funds to invest. The main objective is to profit from the difference in value;

Options. In this strategy, the trader buys/sells options contracts to get the difference in price;

Bullion. This kind of investing refers to long-term investments. The investor invests in physical gold and stores it. Later it can be purchased at a higher value.
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Follow our updates for useful information in our series of articles. You can also visit our previous article to better understand this topic.