Gold has been used as a form of currency for thousands of years. While nobody walks around with a pocket full of gold coins to pay for goods and services anymore, that doesn’t mean that you shouldn’t trade gold.
Gold is great to invest in, whether the market is currently bullish or bearish. Trading gold can be very lucrative and profitable. But you need to know what you are doing.
That’s where we come in. So keep on reading and we will take you through everything that you could want to know about trading gold.
What Moves Gold
The value of gold can be influenced by supply and demand. It can also be influenced by fear, greed, inflation, and deflation.
Traders face more risk when they trade gold in reaction to one of these influences. However, there are times when you might think that fear is driving up the price of gold when it’s actually inflation.
If you jump into the gold bandwagon for the wrong reason, you could end up getting burned.
Gold is often seen as a good store of value. And it tends to go up over time.
Understand the Crowd
Gold attracts a lot of different people. Some people are obsessed with gold and own as much of it as they can. Other people simply trade it like they would any security on the stock market.
Most hedge funds don’t care that much about gold. So it’s mainly retail investors who play around with gold.
Gold bugs add a lot of liquidity while keeping a floor under gold stocks and gold futures.
Read the Long-Term Chart
If you are going to trade gold, then you will need to be familiar with the gold chart. You need to notice trends that took place over the last several decades. There are times when the price of gold went down for many years and a lot of investors started to lose hope.
Gold didn’t move all that much until the US dollar was taken off of the gold standard. That is when it really started to take off.
It’s had a bumpy ride since the 1980s but has surged greatly since the financial crisis.
Choose Your Venue
Liquidity increases when current market prices for gold move a lot. Liquidly decreases when gold doesn’t do all that much. This affects the futures market and the equity markets.
You can buy gold bullion, futures, or ETF. You can also buy stock in gold miners.
The Importance of Knowing About Trading Gold
Hopefully, after reading the above article, you now have a better understanding of how trading gold works. As we can see, you will need to put in a lot of effort to trade gold effectively.
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