How to Trade the Gold Price and Profit!

Submitted by Share Trading on 26 August, 2017 - 10:25

The modern day world presents us with an environment which is overly noisy and congested. The international markets are often no different, however like in life, if you can take the time to clear your head and focus and understand what trading instruments are often are and drives them, then you often see a clear picture...this is often how I approach trading.

Hi, my name is James and I like you to join me as I discover the markets. Today's subject is one of the most traded commodities in the forex market and that is Gold with the hope that at the end of this video you will have a better understanding of the driving factors behind this yellow metal.

Now, this a wall street saying that that says "for 10% your net worth into gold and hopes it goes down and as oil prices rise, it doesn't mean that things are going wrong elsewhere though this relates most to the physical gold market. Today we are talking about the gold spot market.

Gold Spot Trading

Gold spot is a trading instrument which you can trade practically 24 hours a day on the forex market. Unlike its physical counterpart where you have to purchase gold from a licensed distribution organization or licensed exchange and make arrangement for saving or storing it and even find either a buyer or a seller. With spot you are simply speculating on price movements and if you get the direction right, you can benefit from both buying and selling it.

Now one of the first things many markets analyst will always say about gold is that it is a safe haven. Now, Safe Haven is an investment that is expected to retain its value or increase its value during times of market uncertainty. With this in mind, the market often look towards gold when there is a lack in confidence in currency other RISK asset golds such as the indices (FTSE, DJIA, NIKKEI, DAX, S&P500) due to this the market often tends to monitor the performance of indices as in the past if they have fallen, you can see gold prices rises and its vice versa if this indices have risen in value.

Now, though gold is traded against other major currencies, the key relationship is always been with the US dollar which can be dated back to the Bretton Woods Agreement established in 1944. Though this agreement was ended in 1971, you can often see the love and hate relationship between the two. Over the long term, a decline in dollar often meant a rise in Gold prices. In a short term, this is not always true and though there is a special relationship with the US Dollar and gold, Gold is a global commodity and the prices of the metal can often reflect the global sentiment. That is why it often shined for investors during the times of political unrest and conflict.

Gold Price Influencers

But, there is no doubt that the US Dollar strength can play a major role in the value of gold. So, here are some key economic instigators from the US you have to keep in mind.

  • US initial Jobless Claims
  • Consumer Price Index - as Gold can be used as a hedge against inflation
  • US GDP
  • FOMC Announcements
  • FED Base Rate
  • Non-Farm Payroll
  • These events of course can be found on the financial calendar

Also, another fundamental issue to bear in mind is though we are talking about gold to US Dollar, Gold is still a physical commodity and prices can be affected by supply and demand, so it’s often a good idea to be aware of the amount of supply coming from exporters of gold such as countries like South Africa and Australia and also the demand that is on gold from major Central Banks around the world.

So, in final analysis, the key areas you need to be aware of when looking at gold are as follows;

  • Global Economic Sentiments - Is there a demand for a safe haven
  • Performances of the stock market - including indices
  • Global Political issues and conflict
  • The special relationship with the USD - Is the USD rising in value
  • Key US Economic Indicators
  • Supply and Demand for Gold.
  • Join me next time as we look into key factors behind trading the Euro and Dollar. For now, thanks for watching and YOU TRADE SAFE - start trading today!

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