Market participants often fail to take full advantage of gold price fluctuations because they haven’t learned the unique characteristics of world gold markets or the hidden pitfalls that can rob profits. Since gold usually maintains its value even in the most turbulent economic circumstances, many traders resort to gold as it is considered a ‘safe haven’ asset. 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.
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.
Gold prices may react differently depending on different economies and this, in turn, stems from the different uses of gold from different nations and regions of the world. When looking at gold prices, it is important to look at the dollar. They share an inverse correlation with each other, so if the dollar were to increase in value, gold would likely decrease in value as a result and vice versa. You may see increases in gold prices in times of recession and at times of economic prosperity. At times of economic recession, there may be an increase in demand for gold as a hedging tool against inflation or against currency devaluation.
To many people, gold is something special. It is more than just another metal that comes out of the ground. This may well be because since the dawn of time gold has been a status symbol and status is what breeds success or simply just breeds. Whatever you feel about gold, it is just a metal. That isn’t necessarily a bad thing and it doesn’t mean it needs to be cheaper. Gold supply has not kept up with demand so its price should rise. Where once gold was used on things that could be easily recycled. Now gold is used in things that don’t get recycled in a way that the gold is being recovered.
Trade the gold market profitably in four steps. First, learn how three polarities impact the majority of gold buying and selling decisions. Second, familiarize yourself with the diverse crowds that focus on gold trading, hedging, and ownership. Third, take time to analyze the long and short-term gold charts, with an eye on key price levels that may come into play. Finally, choose your venue for risk-taking, focused on high liquidity and easy trade execution.