Trading gold in today’s online markets allows investors to profit from daily price movements or long term trends. Here we’ll impart everything you need to know to start trading gold. That includes trading on gold forex, futures and options, plus exploring what makes an effective strategy. We’ll wrap up with global gold trading hours and useful tips.
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
Gold has been mined since prehistoric times. This precious metal was initially found in small pieces known as nuggets at the bottom of rivers. Gold demand increased so sharply that the ancient Egyptians began mining it as far back as 2000 BC. Gold has been used for millennia as a trusted form of money for trading purposes. The gold standard was a monetary system whereby countries would back up their currency with an equivalent amount of gold. The gold was held in the Reserve Bank of each country, since countries accepted gold as an actual currency. The UK left the gold standard at the start of WWI, and soon after, many countries followed suit.
Investors and traders have access to several types of gold trading options, including:
- Gold Coins and Gold Bullion –
Bullion is the term used to describe a group of precious metal. It is measured in bars, and has a specific weight.
- Gold Certificates –
These resemble bank notes, and they began in the 17th century. Gold certificates serve as evidence of gold ownership. These can be transferred much like cash banknotes. Nowadays, there are several banks that issue gold certificates, and they reflect a quota of gold coin or gold bullion.
- Gold Futures –
Gold futures are contracts that indicate how much gold will be delivered in the future at a predetermined price. These gold futures contracts are used by UK and other investors to manage price risks. They are all traded at centralized exchanges, and contracts provide greater flexibility and leverage than trading actual gold by itself.
- Gold ETFs (Exchange Traded Funds) –
Since gold is expected to generate good returns over time, ETFs have been established. These funds are managed by experts in gold trading. They have the potential to offer much better returns on gold investments than a trader could generate on his/her own. The gold price influences the performance of ETFs.
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. We offer a range of platforms suitable for all level traders including automated trading solutions. You are guaranteed to find the trading environment that suits your style.
Gold Trading Online
AvaTrade makes it easy for you to trade gold online. If you have knowledge of Forex trading, you will have no problem trading gold. The unit of measurement for gold is troy ounces, and this is how gold is quoted against currencies. Since gold is a dollar-denominated asset, it is quoted against the USD. This is similar to how currency exchange rates are presented.
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.
Why is Gold a Safe Haven Asset?
A safe haven asset protects investors during times of market turmoil or extreme volatility. At the very least, safe-haven assets ensure capital preservation during uncertain times. Gold has for a long time proven its safe-haven credentials, maintaining or increasing its value during times of turmoil when practically all other assets decline in value.
A major reason for this is that gold has held its aesthetic value since ancient times. Its physical characteristics have always amazed man – it is malleable, practically indestructible, and very rare. Gold also has a limited supply, unlike fiat currencies which can easily be printed by underlying governments or central banks. There’s only a finite amount of gold that will ever be mined, and even when new deposits are discovered, it takes a few years from exploration to eventual production.
As a safe-haven asset, gold protects investors during times of crisis and not necessarily during times of normalcy when investors are high on confidence. Even so, it is important to understand how to trade gold when there is market instability. It has been observed that gold works as a safe haven asset for a limited time during crisis times until investor confidence starts to return or volatility starts to decline. This means that investors can buy gold in crisis periods when there is extreme volatility and then sell it a few days later when volatility returns to normal. In this way, investors can, at the very least, protect their capital from extreme market fluctuations; but they can also earn returns during a market downturn. This also means that gold can act as a portfolio diversifier- ensuring that the overall risk of a portfolio is reduced without limiting the potential returns.
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.