Investing in gold is one of the most popular forms of trading

Gold belongs to the commodities market, along with other precious metals including silver, platinum and palladium.

The price of gold can fluctuate depending on social, political and economic instability.

Trading gold is referred to as a ‘safe haven’ by traders because its price is not always affected by governmental decisions or inflated by interest rates.

Why invest in gold?

Refúgio Seguro

Unlike currencies, gold is not directly affected by interest rate decisions and cannot be printed to control its supply and demand. Gold is a scarce asset that has maintained its value over time and can act as an insurance policy during adverse economic events. Therefore, gold is considered a ‘safe haven’ asset by many investors.

Cobertura

Gold prices often increase alongside increasing inflation rates and a depreciating dollar. When their trading positions are declining in value, some traders decide to invest in gold to balance out their potential losses. This is known as hedging in the gold market, and it is a popular trading strategy. Gold hedging reinforces the idea of precious metals as a ‘safe haven’ for traders.

Diversificação da Carteira

Having a diverse investment portfolio reduces risk and volatility. Adding gold to your portfolio is a way of diversifying your portfolio and spreading your trading across a range of markets. The price of gold may increase in response to events that would cause the price of other financial instruments to decrease.

There are different ways to invest in gold

There are several options for trading this asset.

Physical gold

An easy option would be to buy and sell physical gold at its spot price. The spot price of gold represents the exact current price that a buyer can buy or sell the instrument. Note though that physical gold cannot be stored as easily as other financial assets.

ETFs de Ouro

Exchange-traded funds provide exposure to the gold market as many ETFs track the movements of the commodity. ETFs are considered a more liquid and less-costly investment compared to owning physical gold.

Gold CFDs

Gold CFDs (contracts for difference) are leveraged products that require you to deposit a small percentage of the overall trade value, which is referred to as margin requirement. You do not actually own the underlying asset but agree to exchange the difference in value from the time difference between opening and closing the position.

Is gold a good investment now?

Gold is a good investment asset to have as part of a balanced portfolio. Gold has some of the highest liquidity in the commodity markets and has increased in value over time.

If you invested £1,000 in gold 30 years ago, it has since then increased by over 500%. This means your original investment is worth over £5,000. However, past performance is not an indicator of future performance but an asset that has shown strong performance over many years could be preferred to one that hasn’t performed so well.

Coronavirus and the price of gold

When the stock markets crashed during the Covid-19 pandemic, gold reached new highs not seen since 2012. Many analysts still predicting further gains. This is most probably due to investors reallocating their wealth into gold, as it is known as a ‘safe haven’ and a hedge to stock markets and financial uncertainty.

Gold is a good investment in the right circumstances

The key to successful investing in gold involves knowing in what circumstances to choose an asset. Therefore, gold can be a good investment, but it can depend on your personal circumstances and gold’s suitability to your portfolio. As with all financial assets, investing in and trading on gold comes with risks of losing capital.

Isenção de responsabilidade:

Esta informação não é considerada como aconselhamento ou recomendação ao investimento, mas apenas como comunicação de marketing. O IronFX não é responsável por quaisquer dados ou pela informação fornecida por terceiros aqui mencionados, ou com links diretos, nesta comunicação.

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First of all, the USD of which Gold’s price is denominated into, continues to be on the back foot moving even lower in the current week. Despite the fact that Gold and the greenback tend to have a negative correlation, in the recent months both have lost significant ground moving downwards, for various and different reasons. The greenback’s movement is mostly dominated by the US fiscal stimulus packages aimed at speeding up economic recovery from losses suffered by the covid-19 outbreak. Even though, no stimulus package has been announced until this moment, the matter seems to be in the center of the markets focus. Media headlines regarding the negotiations seem to keep traders in a wait and see position and any announcements could increase volatility and force Gold’s price in a sudden movement.

Even though Gold’s price is significantly higher from where it started in January 2020, since the previous August and the months forward a strong selling appetite for the precious metal have brought it much lower.

Impressively however, at the moment Gold’s price is approximately $300 higher from where it started the current year, even as it has been in a selling momentum for the past 4 months. In our opinion Gold’s price continues to be driven by news regarding the vaccine distribution and usage in various countries. As more people are vaccinated around the world we could say that economic activity could continue to be on the rise, as they will feel much more confident to leave their house. However, due to the fact that covid-19 cases are still on the rise globally forcing governments to impose new lockdown measures, the situation remains very fragile. In the short term, traders might be finding reasons to add long Gold positions as was the case for Tuesday’s European morning.

On a separate note, more economic outlooks from many countries around the world will be coming up in the following days with a number of central banks having interest rate decisions with conferences or reports.

Countries like the US, the UK, Japan, Norway and Switzerland will be providing information on their economic performance from their central banks perspective. In our view, the most important for Gold traders is the US Federal Reserve interest rate decision and its accompanying press conference. In many cases in the past, the Fed’s events have produced significant market moving effects for Gold’s price thus caution is advised for traders with open positions on Gold or traders willing to trade the event. Please note this is the final FOMC meeting of the year and comments on how business activity, employment levels, inflation or investment appetite could be of particular interest to traders. The event comes up on the 16th of December, in the American session.

Análise técnica

XAU/USD daily chart

Gold has been trading between our (R1) 1870 resistance level and our (S1) 1820 support level since the 2nd of December. Both the pre mentioned levels have been tested in more than two daily sessions in the timeframe we have noted but have not been breached, which is evidence the levels are currently in the market’s focus. To the upside, the levels we have noted above the (R1) 1820 which is the highest price reached so far in December, are the (R2) 1910 barrier and the (R3) 1955 line. To the downside, below the (S1) 1820 support level we have noted the (S2) 1775 last seen on the 1st of December and even lower the (S3) 1740 as our lowest point for this report. The RSI indicator below our chart has formed a slight upward slope implying some bullish momentum is in place currently. Overall, Gold’s trend according to our daily chart could be downwards.

The post The Gold steadies on a downward trend appeared first on Complete Turnkey Introducing Brokers (IB) Solution at IronFX.