If you are an investor who is closely interested in the commodities market and in particular precious metals, then gold is certainly an asset that may interest you, and this for several reasons. The first point of interest when it comes to trading gold is that its value is highly volatile compared to other stock assets. This means that the movements registered by the price of gold are usually very wide and allow short-term strategies. But this also presents a greater risk gold ira companies reviews.
While gold is no longer considered a safe haven, it remains a preferred investment for institutions such as banks, particularly in periods of high inflation, as gold is not sensitive to this factor and continues to hold level while currencies they lose value.
Finally, let us bear in mind that gold is an asset that reacts a lot to the phenomenon of supply and demand. It is therefore possible to negotiate with this long-term value, based on the fact that production is currently reaching its limits, while demand may still be increasing given its use in the industry, particularly the Chinese industry, which is in full expansion.
As you no doubt already know, gold is considered a safe haven in the investment world. This means that it tends to hold its price or even gain value while the other financial markets encounter difficulties. This was the case at the beginning of the 2008 economic crisis, with a real boom in the price per ounce, which also happened recently during the Covid-19 crisis.
In this sense, both long-term and short-term strategies are possible with gold. In any case, it is preferable to buy gold at the right time if your investment horizon is longer than a few years, that is, buy when its price is relatively low and therefore more susceptible to earning points.
To trade long-term gold, you often buy physical gold, whether online, at a bank or at a gold dealer, always keeping in mind the costs of storing and preserving your gold. It is still possible to take a long-term position in the gold market using CFDs, but in this case, it is preferable that there is no leverage.
Gold trading on the stock market and how it works
There are several means of investing in gold on the stock market. Banks propose, for example, gold accounts that allow defining a certain amount of gold with the aim of reselling it later. You can also buy and store physical gold for the same purpose. But both solutions have the drawback of having significant expenses and low profitability.
Trading gold through CFDs is also possible and increasingly popular. This method, proposed by online brokers, allows you to speculate up or down on the price of gold using what is called contracts for difference and without having to buy physical gold.
In fact, we observe that more and more online trading platforms, also called online brokers or brokers, integrate gold among their available assets. The objective of these platforms is to allow everyone, both individuals and professionals, to speculate with different assets such as currencies, stock market assets and even commodities, which are particularly appreciated assets.
By registering on a platform, you will be able to make a deposit and use this capital to bet on the rise or fall of the price of gold according to strategies and analysis that you will have carried out. But these platforms are not adapted for novice investors as they require some knowledge of the market.
The operation of these gold trading platforms is relatively affordable. After you have made your first deposit, you can invest directly in the market using what is called CFD or contracts for difference. When you think that the price of gold is going to rise, you only have to bet on the amount you want on that asset to buy, and resell your position when the price has risen enough.
On the contrary, if you think that the price of gold is going to go down, you will take a position to sell and resell your position when the price has fallen enough.
Of course, for the realized profits to be up to par, the price differences must be significant and, above all, your trading strategy should not be established randomly, and will be based on a strict and in-depth analysis of commodity prices. Cousin in question.
How to perform a fundamental gold analysis:
Fundamental analysis is, as we have quickly mentioned above, one of the indispensable types of analysis for trading gold and for understanding its current and future trends with the help of technical analysis.
This analysis is particularly based on the study of different external factors or those linked to the gold market, which influence the prices of this raw material. We suggest you discover here some simple examples of elements that you will have to integrate into the fundamental analysis before buying gold on the stock market:
- The value of the dollar, which is inversely correlated with the value of gold. This means that when the dollar rises, gold tends to fall, as it is no longer cheap for investors who have other currencies. On the contrary, when the dollar goes down, gold tends to go up. But this indicator, like the others, is useless if used alone.
- The current economic situation should be closely monitored since it has been found for some time that the effects of the European crisis have a negative impact on the price of gold. On the contrary, when good news hits the European market, investors tend to buy gold again.
- Finally, global economic growth has also had a positive impact on gold prices as the better the industry works, the more it uses resources such as precious metals. We will continue here in particular emerging countries such as Asian countries and especially China, a large consumer of gold.
Of course, the list just mentioned should not be taken into account on its own to carry out the analysis prior to buying gold on the stock market. In fact, you will find, depending on the period and according to the specific world economic context, other fundamental indicators that may be useful within the framework of the analysis. More generally, we will try to follow closely all the current affairs of the market and try to identify events or publications that in the past have had a real impact on the price of gold.
Let us also remember that fundamental analysis is not the only essential analysis to try to anticipate gold prices. It will also be necessary to systematically use, in parallel, a technical analysis that, as we are going to see, is based on the study of the graphical movements of this value.
How to perform a technical analysis of the price of gold:
As we briefly mentioned above, gold is an asset that shows high volatility in the market. This means that your movements in the stock market can be rapid and of significant amplitude. Therefore, technical analysis is essential before taking a position on the price of gold and even before any purchase of physical gold. This analysis will allow you to interpret historical gold stock charts to find signs of rising or falling prices, identifying a probable trend, tracking or reversal, or determining market volatility over a given period or time.
The stock charts proposed by online brokers are usually customizable and allow full technical analysis. It is possible to visualize various technical indicators without having to calculate first and thus have the freedom to interpret according to your knowledge.
Among the indicators most used by investors in gold, there are of course the MACD , the moving averages , the Bollinger bands or the pivot points and the support and resistance levels .
Who is online gold trading for?
We now propose some details regarding the types of investors who may be interested in the online gold market. It is important to know that trading gold through CFDs or through other trading instruments is not a suitable activity for beginners. It is necessary to have a high knowledge and a good global understanding of the gold market before embarking on an activity of this type.
Like all financial transactions, speculation in gold presents risks and, without an awareness of these or without establishing a real and thoughtful trading strategy, it is common to make mistakes that can cause losses of part or all of the invested capital.
Among the items that can present significant risk, we will focus on the leverage proposed by gold CFD brokers. This leverage allows you to increase the amount invested and potentially the gains made, but it also increases the risk just as importantly.
What is the best time to buy gold?
When we want to take a position in the gold market, the most delicate question we face is knowing when the best time to buy gold is.
For this, it is necessary in particular to carefully follow the monthly charts on gold. For example, some traders use the lower average and wait for the price of gold to approach again, hoping that this will announce an upward trend. From the charts, it is possible to establish two different strategies on buying gold. You can wait until the price of gold is at its lowest point to buy it at the best price, or you can wait for an upward trend to be confirmed. This choice will largely depend on your trading horizon.
As we mentioned above, the general economic climate greatly influences the price of gold. When we are interested in the data on these values, we see that the price of the yellow metal tends to increase as the world economic situation deteriorates and if the other indicators are proving.
This phenomenon is due to the fact that private or institutional investors want to insure their positions and their investments in case the other markets collapse. In this sense, other psychological data may indicate an upcoming rise in gold prices.
Ultimately, to get an idea of what the future of gold could look like, pay particular attention to economic and financial news. The more this news is published, the more fear investors will be, and they will tend to withdraw from the markets. However, these investors will sometimes inject their money accordingly into a safer market, that of gold.
There is another must-have outdoor indicator when you want to buy gold. It is of course the dollar. Taking into account that gold is valued and therefore bought in dollars, wait for the EUR / USD parity to rise to take advantage of the gold at the best exchange rate. On the other hand, a decline in the dollar against competing currencies is usually good for bulk investments, causing gold prices to rise.