Gold is one of the most popular assets traded worldwide by investors, funds, and speculators who aim to profit from the price fluctuations or stand up against inflation. Unfortunately, many market participants fail to catch the wave and take full advantage of what the gold market can offer due to the lack of knowledge and experience.
What is Gold Trading
Since gold is a highly valuable asset, many traders profit on its price via options, futures, ETFs, CFDs, or shares. When trading gold, you can easily benefit from the market's ups and downs. While choosing a position, a trader aims to predict the market movement – the further the market moves in their predicted direction, the higher profit an investor will get, and vice versa, the market took the wrong turn – an investor is losing.
Compared to the forex market, the daily trading volume of this asset is higher than most currency pairs (except majors). For investors, it means two things – high liquidity and tight spreads.
Gold as a Safe Haven Asset
Whether there is a crisis in China, Africa, or elsewhere, it’s more than understandable that, unfortunately, economic or political instability has already become an integral part of our modern environment. It’s not bad; it’s just how it works. We all know it and successfully deal with it, finding balance and solutions.
When it comes to an asset that can protect your investments during market instability associated with different factors, gold is the one you should pay attention to. At the fundamental level, gold maintains or even increases in value even when other assets experience hard times. However, gold positions itself as a safe haven asset for a certain period of time until investors’ confidence is back and volatility declines – investors buy gold during hard times when high volatility is observed in the markets and sell it a bit later when volatility is moderate. This is how investors can protect their capital from unprecedented price fluctuations.
Investing in Gold
Maybe you’re the one interested in buying and selling gold frequently. You should know that there are different types of this kind of investment, so read the next part to find out which one is more suitable for you.
As the main way of trading gold, a futures contract provides an opportunity to buy or sell gold for a specified price on a specified day in the future.
Gold Exchange Traded Funds (ETFs)
This is how an investor can access a wide range of opportunities having a limited budget. ETFs can be bought or sold like a stock with the difference that the gold price will still directly affect the ETF value.
Gold options are similar to gold futures. But when there is an obligation to uphold the agreement choosing a futures contract, the situation with a gold option gives the right (but not the obligation) to buy or sell gold for a specified price on a specified date in the future.
Gold Mining Stocks
Such stocks may correlate with the gold price, but still, the growth of a stock strongly depends on the financial capacity and earnings of a gold mining company. Accordingly, an investor doesn’t have that much control over the value of their asset.
Gold Contract for Difference (CFD)
This derivative allows investors to trade gold without owning it – everything depends on the accuracy of the investor's assumptions on whether the value of an asset will increase or decrease.
Gold Trading Tips
Read some helpful takeaways if your intentions to trade gold are serious:
- It’s crucial to understand fundamentals. Analyze what factors, currency, or events influence the gold price and dive into market sentiment;
- Familiarize yourself with market players that focus on gold trading, ownership, and hedging;
- Trend is your friend. Monitor price fluctuations closely to be on top of things and make rational decisions;
- A risk management strategy is a must. This is just how you’ll manage to control and minimize your potential losses;
- Technical and fundamental analysis should become an integral part of your trading activities;
- Trade with a strategy. It’s your lighthouse.
Profitable gold trading is all about choosing the right financial instrument and diving into in-depth analysis. This market has a lot to offer to anyone who strives to achieve good results and gain expertise.
JustMarkets is the world’s trusted broker that offers 180 popular trading instruments. By having a trading account on JustMarkets, you benefit from advantageous conditions, including high leverage, low spreads (from 0.0 pips), as well as commission-free deposits and withdrawals. And if you have any questions, there is a helpful support team working round the clock to ensure you have the most convenient trading experience.
Try your hand at currency trading by opening a demo account on JustMarkets. It’s a quick and risk-free way to master trading in the most liquid financial market. A practice account will help you learn trading basics and develop a strategy before investing money. Start trading today to take care of your future tomorrow.
What is the Best Time to Trade Gold?
Historically, XAU/USD has shown the most volatility on Wednesdays between noon and 8 pm (GMT+1). These volatile hours provide more advantages to traders to profit from the gold’s price fluctuations.
How Much Money do you Need to Trade Gold Futures?
You can start trading gold futures with as little as $2. However, remember that the amount of money one makes from trading depends on the size of their investment.
Is Gold Futures a Good Investment?
Gold futures investments involve high risks, although they can be very profitable. Consider your level of expertise in the market and risk tolerance before investing in gold futures.
How do you Trade Gold Futures?
Gold futures are traded at exchanges, e.g. Chicago Mercantile Exchange (CME), New York Mercantile Exchange (NYMEX), and Tokyo Commodity Exchange (TOCOM).