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In 2020 it is possible to make profits from trading commodities, such as gold without having to physically own the metal. Gold trading online via CFD’s is based on opening a temporary order to buy or sell an exact amount of gold. The profit or loss is determined by the change in the price of the gold metal during the contract duration.
At AvaTrade South Africa you can trade gold online, easily and effortlessly. Try gold trading with the leading regulated broker and enjoy the following benefits:
- Trade gold with competitive spreads
- Make larger trades with leverage of up to
- Trade on the powerful MetaTrader 5 & MetaTrader 4 platform
- Trade whichever way you think the market will go – long or short
- Trade anytime with our unique trading app AvaTradeGO
- Get 24/5 live client support in your language
How to Trade Gold using Technical Analysis
Those who are familiar with technical trading strategies will see how the market conditions have changed in gold prices over the years with a look at a long-term chart. It’s easy to see that from 1999 through 2012 gold prices were in a solid uptrend. Then from 2012 through 2015 we saw a steep correction that turned into a sideways market from 2015 through 2019. Since 2019 the uptrend has resumed.
It is always important to know the underlying trend in the market when choosing a trading strategy. When the market is trending strongly, you’ll want to use a momentum-based strategy, but when the market turns sideways a ranging strategy or low volatility strategy is best.
When using technical analysis to trade gold the best way to start is by using simple trendlines and prior highs and lows as levels of resistance and support. These can give you fairly accurate price targets if you understand the underlying trend.
To find support levels simply connect the previous lows, while resistance levels are found by connecting the prior highs. And for those familiar with forex patterns like double tops and bottoms or head and shoulders, you’ll find these to be just as accurate in analysing the gold market.
More advanced technical traders can also use Fibonacci retracement levels, various oscillators, or other types of analysis to find the best entry and exit points.
Our Gold Trading Techniques
It is also possible to trade gold with fundamental analysis techniques. The most important consideration on any given trading session is whether market sentiment is positive or negative. This can have a strong impact on markets, and even during a strong uptrend a period of negative sentiment can cause a steep drop in price.
More advanced gold traders will also look to the U.S. dollar, because gold has a strong negative correlation with the USD. That is, when the USD strengthens gold will often fall, and when the USD weakens gold will often rise. It isn’t 100% accurate, but it needs to be considered because it is a strong correlation.
Another consideration for gold traders is the current demand for jewellery. Because 50% of gold production is consumed by jewellery production it’s a wise idea to keep your finger on the pulse of demand for gold jewellery, particularly in India and China, where gold is still used as a long-term investment for many people. Other “hidden” things that can influence the price of gold include central bank buying and selling, and the small industrial usage of the metal.
Traders also need to keep an eye on the supply side of things by watching production numbers from the major gold mining companies like Newmont Mining and Barrick Gold.
And just like any other asset all the money management and risk management rules apply. Always avoid over-leveraging your trades, make sure to set targets for exits, and always set your stops in case something unexpected happens in the market.
Gold Trading History
Since prehistoric times gold was one of the first metals to be mined, mainly because of the form in which it was found, being nuggets or small pieces at the bottom of a river. It became so high in demand that Egyptians started mining it in 2000 BC. Throughout history many civilizations chose gold as a reliable and universal form of money for trading goods.
The gold standard, the monetary system for which the economic currency used is backed up by the gold reserves of the issuing country. It came to exist, due to the recognition of gold as an actual currency. It was abandoned by the United Kingdom and the whole British Empire when World War I began. Most of the other countries also abandoned it during the 20th century.
How to trade gold
Different forms of gold available to traders and investors:
Physical metal (bullions or coins) – A bullion is a grouping or bulk of precious metal. Measured in the form of a bar and weight.
Gold certificates – These are very similar to the first paper bank notes. Started in the 17th century, these gold certificates acted as proof of gold ownership, and were passed like cash payments. Today they are still issued by certain banks, and represent a quantity of gold bullion or coins for its owner.
Gold futures – Is a contract agreement for the delivery of gold in the future at a set price. Investors use this to manage the price risk. Since gold futures contracts are traded at centralized exchanges, these contacts offers more leverage and flexibility than trading commodities themselves.
Gold-based ETFs – With the idea that gold continues to offer good returns, the ETF’s – exchange traded funds, are managed by gold trading experts. They can potentially give you a better chance to earn more, than if you were to trade it on your own. Keep in mind the price of gold still will continue to affect the ETF.
- MT4 Symbol – GOLD
- Exchange – NYMEX
- Trading Hours – 23:00 – 21:59
- Margin: 0.50
- Increment: 0.01
- Minimum Trade Size: 1 ounce
- Spread Fixed
Why Trade Gold with AvaTrade?
You can join AvaTrade ZA today for as little as and start trading gold and other precious metals. As a welcome bonus, we are offering up to $10,000, depending on your initial deposit. We pride ourselves in being a regulated and trusted broker worldwide for the past 11 years and are here to help you along the way.
You will get access to a range of educational tools, trading advantages and benefits that are exclusive to AvaTrade south african clients.
Gold Trading Online
Gold trading with AvaTrade is easy to understand, especially if you already have some experience of the forex market. Gold units are measured in Troy Ounces against a currency – usually the dollar – in a similar way to a trading Forex currency pair.
Gold Trading Influences and Gold Trading Strategy
Several distinct factors come into play when analysing the movement of the Gold price:
- Supply and demand – Most of the global demand comes from jewelry production and manufacturing (50%), and investment purposes (40%). Increased demand with low supply can mean a higher price, on the opposite end an oversupply, with weak demand can drive prices lower.
- Market sentiment – Political uncertainty and/or instability contributes to global growth uncertainty and does help in the rising prices of gold.
- Market volatility – Gold has often been used as a safe haven investment when markets are unpredictable.
- Currency movements – The US dollar is a strong influencer. When the dollar falls, commodity prices around the world increase. The US dollar and gold have an inverse relationship.
Overall if you are looking to an alternative investment arena, or a hedge – which is a reduced risk of price movements in any asset, then gold might be the right asset for you.
Please note that trading in this market involves risk like any other.
Here are a few tips for trading gold:
- Gold is compared to the yen since both assets fall into the category of a “safe haven instrument”, they tend to move in the same direction. Often, you can check your trade set ups by comparing the two.
- Focus on the behavior of the price and keep in mind that commodities can move more than currencies.
- The most popular Gold exchange rate is the XAU to USD rate. XAU is the trading terminal’s code for gold.
Gold Trading Main FAQs
- Is it still worth it to trade gold?
Gold has been used as a medium of trade and a store of value for thousands of years, and trading gold in the 21st century is just as relevant as it’s always been. Gold remains a valuable store of value, with many investors using it as a hedge against financial crisis, inflation, and geopolitical risks. As one of the largest and most liquid markets in the world, the gold market offers traders huge opportunities. Prices can be volatile, but the market is rational, which makes trading gold an exciting and potentially profitable endeavor.
- Is gold the best precious metal to trade?
Gold is definitely the most popular metal for both investors and traders, but if you’re looking for a precious metal with a bit more “pop” then silver is also a very good choice. That said, gold is often easier to forecast since it is primarily used as a safe haven asset and a store of value. Unlike silver and the other precious metals gold does not have any large industrial use, so it has fewer factors impacting its movement. Plus the huge liquidity makes the market accessible.
- What is the best strategy for trading gold?
To trade gold successfully there are many strategies that can work. Of course if you can follow the professionals, the so called “smart money”, you’re likely to have a better chance of success. One method they use is to focus on the seasonality of gold. Historically gold makes it strongest moves in September. It is also strong in the first two months of the year. So these are the best months to look for a long setup. Conversely gold is weakest in March and October, making these good months to look for pullbacks in the market.