Gold is a precious metal and has been considered a valuable commodity since ancient times. Some of the reasons are that it is a material with limited supply (it is not possible to manufacture it) and that it is expensive to find. In addition, it does not corrode or rust and is relatively easy to work with to make jewelry or coins. In recent decades, it has also been used in the manufacturing of electronic components best gold ira companies.
Due to all these properties, it is accepted as a global means of payment on which governments and central banks cannot act. For traders and savers, gold is a safe haven asset. Although it does not provide high returns in a short period of time, it also does not lose value due to inflation or monetary policies.
So, how to trade gold? Investors trade the price of gold in three ways:
Speculation: consists of buying gold when it is relatively cheap and selling it when it has risen in price, making profits on the difference
Diversification: to avoid shocks, you can add to your investment portfolio assets that offer high returns with high risk and others, such as gold, that have low risk and low returns.
Hedging: When the economy suffers, safe-haven assets tend to gain value. Opening buying positions in gold in this context helps you cover the losses that other assets may generate.
What to Expect from the Gold Price in 2024?
The price of gold hit highs in December last year after a solid bullish momentum that began in October. Although it fell slightly and started 2024 below the resistance located around 2,074 – 2,091, which has been in force since August 2020.
The general sentiment is that it could continue to move higher and that this level will be broken in the first half of the year. The most conservative forecasts speak of a new visit to 2,150, while others such as those published by JP Morgan analysts see a possible rally to 2,300 once the aforementioned resistance is overcome.
Assets Available to Trade with the Price of Gold
You have at your disposal 3 types of assets that allow you to trade Gold:
Futures
ETFs
CFDs
Futures are traded on the CME (Chicago Mercantile Exchange), are highly regulated, and are a transparent but expensive option. Futures brokers will ask you for a few thousand dollars to trade and you must pay data fees.
For their part, ETFs and CFDs have much lower operating costs. The latter are a great option for swing trading or intraday trading and you can start with amounts as low as 100 USD (sometimes even less). If you want to invest for the long term, ETFs are more interesting because they have much lower commissions.
Hours to Trade Gold
The gold futures market operates 24/5 without interruption, from 6:00 p.m. on Sunday to 5:15 p.m. on Friday (New York time). So you can operate any day during the week at the time that best suits you.
CFDs and ETFs replicate the futures price and in most cases it is possible to trade at the same times. In any case, it is advisable that you review the specific conditions of your broker, because the hours could be slightly different.
Why Does the Price of Gold Rise and Fall?
Just like any other market, what causes the price of gold to rise and fall is the pressure of supply and demand. When there are many people interested in buying, the price tends to rise. While if there are more interested in selling, the price moves downward.
Whether the predominant pressure is buying or selling depends on aspects such as:
Inflation: when it is growing or there is a risk that it will, interest in buying gold increases because savers want to avoid the loss of purchasing power. If inflation is at low levels, the general desire to buy gold decreases
Economic growth: If the economy is growing, investors place their capital in companies that can give great profits. Interest in buying gold drops
Need for liquidity: in times of change, investors prefer to have cash in case good opportunities appear. This leads them to close most of the positions they had open and can generate selling pressure on gold.
Industrial demand: If the level of production in the jewelry and electronics sector increases, the demand for gold also increases to meet the needs of the industry
Geopolitical events: Political instability and conflicts bring uncertainty to financial markets. Investors tend to place their capital in safe-haven assets to avoid unexpected shocks to the stock market or currencies.
Generalized sentiment: situations of general pessimism make savers more interested in protecting their capital than in obtaining high returns. This translates into growing buying interest in gold. If there is optimism, they prefer to invest in other assets that give them greater benefits. The price of gold tends to fall
How to Trade the Price of Gold?
To start trading gold, follow these steps:
Decide the type of asset you want to use
Check our list of gold brokers and choose the one that best suits your needs
Click on “Start” to access their website
Fill out the registration forms and verify your identity
Make your first deposit
Open the trading platform and select gold
Use a solid trading plan to determine when to open positions
Close your operations when appropriate
If you don’t know what strategy to use to invest in this asset, take a look at the next section.
Strategies to Trade Gold
You can trade gold both from a fundamental point of view and through technical analysis. Within the latter, strategies with indicators are equally valid as those based on price action.
You should also not stop paying attention to the seasonal patterns that occur in this market, such as the decline and subsequent rise that usually occurs towards the end of the year.
Below are some ideas that you can use in the gold market. Whichever one you use, remember that you should follow conservative risk management and always use a stop loss.
Conclusion
The price of gold, although it does not provide great returns, does not devalue over time either.
For these reasons, many traders use it to speculate, to diversify their portfolios or to execute hedging. If you are thinking about trading with the price of gold, remember that you can do it in the futures market, with CFDs or through ETFs.