Investors can profit from daily price movements or long-term trends by trading gold on today’s online markets. We’ll teach you everything you need to know about gold trading right here. This includes trading gold on the forex market, futures, and options, as well as determining what constitutes a successful strategy. The global gold trading hours and useful tips are presented in the conclusion.
How does gold trading work?
It is critical to understand the fundamentals before opening a trading account. In today’s markets, gold traders have a variety of options:
- Bullion – Bullion is physical gold, often in the form of bars or specialty coins. The value attached to the precious metal depends on the type of bullion and the unit weight. While owning physical gold may be easier than sourcing large amounts of oil, there are still transaction fees, storage costs, and insurance to consider.
- Gold Futures – Gold futures and micro futures contracts stipulate a fixed price for the commodity at a specific point in time in the future. Because gold futures are traded on exchange platforms, they promise greater leverage than trading physical gold. Yields depend on the price fluctuations between the time the contract was agreed and the expiry date.
- Gold Certificates – Similar to banknotes and dating back to the 17th century, gold certificates prove ownership.
- Gold CFDs – Gold CFDs (Gold Contracts for Difference ) are short-term orders to buy or sell a fixed amount of gold. Gold CFDs have a set process. The returns generated when trading gold CFDs depend on price changes during the contract.
- Gold Swaps – Swaps are custom contracts traded over-the-counter (OTC). Futures and options contracts, on the other hand, are found on central exchanges.
- Gold ETFs – Gold exchanged-traded funds (ETFs) are typically purchased from a broker or exchange . They allow you to buy a pool of securities, such as commodities, without having to buy each individual asset. The costs are low, but the value of the ETF is linked to the price of gold.
Trading gold in the forex market
Gold is effectively a currency in the foreign exchange market. It is almost always traded against the US Dollar, code XAU/USD.
As a result, your strategy must track US dollar movements. A rise in the US dollar price could push down the value of gold. So stay tuned to forex news sites for tips on upcoming trends and analysis.
Liquidity also plays an important role when trading gold on the forex market. The average daily trading volume of gold exceeds all currency pairs except EUR/USD, GBP/USD and USD/JPY.
Note that gold trading hours at forex brokers often run continuously around the clock.
The Gold Trade’s History
Physical gold trading dates back to the year 2000 BC, when ancient Egyptians began mining the precious metal. The global raw material supply is now over 170,000 tons, with annual production having tripled since the 1970s.
Its value is so stable that it has been used as a currency reserve by countries for centuries.
The influence of the gold-silver ratio
Gold and silver day trading is popular, but what is the gold to silver ratio and how does it work? Simply put, it’s the amount of silver required to purchase one ounce of gold.
For instance, if an ounce of gold costs $1,000 and an ounce of silver costs $50, the gold to silver ratio is 20:1.
You can profit whether the market is trending up or down if you can predict where the gold to silver ratio will go. However, while silver is less expensive than gold, it is also more volatile. Trading gold and silver can also be used to diversify a portfolio’s precious metal holdings.
Check out the graphic below:
Gold Trading Strategies
There are many different techniques and mechanisms that you can use in your gold trading strategies. All require daily technical analysis on price and volume charts. You also need to understand what affects the price of gold:
- Supply and Demand – Daily volume data shows that half of global demand is driven by jewelry production. Investment accounts account for another 40%. Look at price charts and you will see that as demand increases and supply decreases, price increases. Conversely, when supply increases and demand decreases, live prices decrease.
- Geopolitics – A quick look at the history of gold prices and you will see that today’s forecasts are being guided by geopolitical forces. The uncertainty in the financial markets will prompt companies to rush into the price of gold, which will push prices higher. So familiarize yourself with a map of the world and familiarize yourself with the basics of economics to ensure you are well prepared.
- Market Volatility – Real-time trading signals in your charting software react to market movements. When stocks don’t perform, people turn to gold. Conversely, when forecasts for the stock market are strong, trading volumes for gold fall.
Putting strategy into action
Methods differ, but a relatively simple strategy that can provide a reasonable margin considers geopolitical factors. You could buy gold while selling the Australian dollar against the US dollar if the global outlook appears to be tightening. You might also want to consider what the major studios are up to.
If a company like Newmont Mining increases production, supply will rise, and the price of gold will fall.
Gold trading brokers: The best gold trading websites have reliable charting software. Gold trading is particularly popular on MetaTrader 4 (MT4) and MetaTrader 5 (MT5).
However, regardless of the system you use, your software will require simple price charts and signals. Also useful are free tools that explain dates, symbols, and patterns.
Opening hours of the gold market
Major trading hours around the world can vary, but the popular commodity is almost always available. Below we have detailed the key opening and trading times of some of the major gold exchanges.
- Online Trading Hours in New York, USA – Hours 1:20pm – 6:30pm (GMT)
- Online trading hours in London, UK – opening hours 08:00 – 17:00 (GMT)
- Online Trading Hours in Mumbai, India – Hours 04:30 – 18:00 (GMT)
- Online Trading Hours in Jakarta, Indonesia – Hours 02:30 – 10:30 (GMT)
- Online trading hours in Dubai, United Arab Emirates – opening hours 04:30 – 07:30 (GMT)
- Online Trading Hours in Islamabad, Pakistan – Opening hours 05:00 – 13:00 (GMT)
Beginners’ guide to gold trading
Beginners in gold trading should concentrate on trading gold on a chart at first. The market sentiment is the next factor to consider. Gold prices are likely to fall today if market sentiment is bullish.
In contrast, if the market outlook is bleak, the price is likely to rise. Start trading gold with this straightforward strategy.
Consider the demand for jewelry for cash as your confidence and gold trading profits grow.
Keep an eye on the current demand in China and India, where gold jewelry is used as a long-term investment vehicle. This could be a sign of future price movements.
Pros and cons of trading gold
Pros
- Gold holds up well in times of global instability, even when the price of other assets falls. Finally, there are a number of financial instruments available for trading gold, from e-micro futures to stocks and gold bonds.
- One of the benefits of trading gold is its ability to hedge against inflation. Unlike most traditional currencies, gold retains its purchasing power even during inflation.
Cons
- Gold is very volatile. This means that while the market has the potential to generate significant returns, there is also a serious risk of losing money.
- Gold ETFs, for example, will likely have brokerage fees associated with them. Finally, trading gold involves significant liquidation margins.
- Gold rate and price during today’s trend does not reflect where it may be in a few days or the next week. Added to this are the costs of gold trading.
Conclusion
There is no one-size-fits-all profit calculator for gold trading. Your strategy and overall business plan will determine the outcome. While trading for a living has the potential to make you a millionaire, most people will lose money. So, before you open an account and using online trading platforms, make sure you’re aware of your own limitations and that you’ve done your homework.