5 Key Tips That You Need to Know When Trading Gold
This post was last updated on February 24th, 2021
Beginners often make the mistake of assuming that trading gold is easy – but that simply is not true. The fact of the matter is that gold is actually one of the more complicated markets out there, and its movements are not that easy to predict.
If you want to make a profit when you buy or sell gold, there are a few important tips that you absolutely need to know:
1. Think about the current political and economic climate
Always remember that gold is regarded as a stable ‘safe haven’ for traders. That means that when there is economic or political uncertainty, many traders will buy gold to protect their assets. On the other hand when things look good, traders will often sell gold and invest in opportunities that have higher interest rates.
Simply put, the current political and economic climate will heavily affect the price of gold and its future movement.
2. Keep an eye on what central banks are up to
Although gold is not subject to the whims of governments and central banks, their actions can often affect its value. Central banks often buy gold when they are concerned over the future price of major currencies and use it as a hedge.
Needless to say if central banks start buying or selling gold in bulk, it will affect the price. In either case it is important that you watch carefully so that you can take advantage of the opportunity that presents, or avoid potential losses.
3. Consider long term trades
Gold has had its fair share of ups and downs over the years, but in general it has been on an uptrend for close to fifty years. Its price did drop tremendously several years ago, but since then it has been on the uptick.
Because of the drop in price from its peak in 2011, and the continuous strong uptrend it is seeing – it is a good idea to think long term. By putting in some medium or longer term longs, you could use gold to safely earn a profit.
4. Follow New York trading hours or take off-hour risks
If you are day-trading in gold, it is generally safest to follow the New York trading hours. Although gold is a close-to 24 hour market, its peak liquidity is during those hours and as a result it is less volatile.
On the flipside if you want to use scalping strategies, off-hours trading is the way to go. Because there will be greater volatility, there will be more potential for profit – but with increased risks.
5. Be aware of shifts in gold production
Today’s gold mining is not as easy as it once was. The most accessible gold reserves are all but depleted, and accessing what remains has significantly higher costs. Because of that the production of gold has remained relatively stable over the years.
Any shift in the production of gold could affect the status quo. It is most likely that production could decrease, in which case it will put a squeeze on the demand and the price of gold will increase.
Be sure you keep these tips in mind when you sell or buy gold anonymously. If you do, it should be a bit easier for you to analyze the market, and identify the right trades to make at the right time.
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