Gold Price Chart & Gold Trading

If you are wondering, is gold a good investment now? The short answer is gold is still a good investment now and will likely continue to be a good investment in the foreseeable future.

Gold is still a good investment today because the yellow metal has intrinsic value, unlike some current investment fads such as meme stocks and cryptocurrencies. In addition, gold has long been regarded as a safe-haven asset, which retains its value when inflation erodes the value of other asset classes. Thus, while some might argue that gold prices have not risen much despite the rising global inflation, the metal remains a crucial component of most investors' portfolios.

If you are asking, should I buy gold now? Well, the answer is that it depends on your investment goals. If you want to hold gold for multiple years and benefit from rising gold prices, then you can expect average gains. However, if you want to profit from short-term swings in gold prices as a swing trader, you could make significant gains trading gold. But high returns also follow higher risk.

Beginner investors usually ask, is gold a safe investment? The answer is yes. Gold is one of the safest investments out there because it is a physical commodity market. However, it still sees large price swings, which, if managed well, can be used to produce above-average returns.

Nobody can predict the future with a high degree of accuracy, but given that gold has been used as a store of value for thousands of years. The commodity is still valuable today and is likely to remain valuable in future.

As you start to trade, you might wonder, how is gold priced? Well, the price of gold is primarily determined by the forces of supply and demand. Periods when demand for gold is high and the supply is low usually lead to higher gold prices. However, the opposite is true of periods when the supply of gold is high and the demand is low as prices tend to fall.

As a physical commodity, gold has actual uses, such as making jewelry and making electronics, as a form of money and investment purposes, hence why the forces of demand and supply determine the metal’s price.

Another critical factor that affects the price of gold is inflation, with most investors being aware of the gold price vs inflation debate. In theory, gold prices are expected to rise in tandem with inflation as investors stockpile the metal to hedge against the devaluation of fiat currencies.

Other factors that could cause gold prices to rise include political instability, quickly triggering a spike in gold prices. For example, the trade war between the United States and China was a massive boon for gold prices, which rose throughout 2019 and a considerable part of 2020.

Gold price fluctuations could also be driven by the accumulation of gold reserves by Central Banks globally as a hedge against inflation and prop up their currencies’ value. In addition, countries with volatile currencies have been stockpiling gold to stabilize the value of their local currencies.

Most Central Banks buy gold to diversify their treasury holdings from the typical foreign currencies they hold on behalf of their governments. Therefore, they are a vast source of gold demand after buying 650 tons of gold in 2020.

Over time, the overall gold price trend has been up, with the yellow metal currently trading above $1,700 compared to a mere $100, 50 years ago.

Investors wondering what causes gold prices to fall may be surprised to learn that gold prices typically fall during periods of economic and political stability. In such cases, most people do not feel the need to buy gold as a hedge against inflation, given the current stable economic and political environment.

The US dollar has a significant impact on the gold price, given that the two are categorized as safe-have assets and compete for investment capital. As a result, investors have to choose between investing in gold and the US dollar, depending on market conditions.

In most cases, investors will buy gold if the US dollar is falling to protect the value of their investments, given that a falling dollar usually coincides with rising inflation. Investors also tend to buy more dollars if the reserve currency rises, which typically coincides with falling gold prices.

Therefore, we can say that the US dollar and gold are opposites in that gold prices usually benefit from a fling dollar, while the dollar benefits from falling gold prices.

The weekly gold price chart above shows how gold prices rose from October 2018 to August 2020, marking a significant bull trend.

Trading as a beginner, you might be wondering how you can trade gold after hearing about its qualities as a safe-haven asset. You can trade or invest in gold using various methods, but the most common is not buying and selling physical gold but trading gold products online.

Buying and holding physical gold is a cumbersome process that requires you to store actual gold, which could put you at risk of being targeted. Therefore, for most investors, the best way to trade and invest in gold is via online instruments such as gold CFDs, stocks, and ETFs.

Gold CFD refers to tradable instruments offered by most Forex and CFD brokers that track the underlying prices of the yellow metal. Gold CFDs trading allow you to trade gold without buying an ounce of gold, which trades at over $1700. Instead, you can buy fractions of gold for a few dollars and try to profit from the constant changes in gold prices. You can also bet on falling gold prices without having to deposit vast amounts of capital and margin with a traditional broker.

As a trader, you might have heard of the term paper gold and may be wondering, what is paper gold? Paper gold refers to all the digital representations of gold traders by millions of investors from all over the world. For example, gold CFDs are paper gold, gold futures are paper gold, among others. However, gold stocks are not paper gold because they represent the shares of gold mining companies, not actual gold. Therefore, paper gold refers to instruments that track the actual price of physical gold.

So, how can you trade gold CFDs? The easiest way to trade gold CFDs is to open an account with a regulated broker that offers gold CFDs as a tradable asset. You should choose a licensed broker by a tier 1 regulator like the UK’s Financial Conduct Authority (FCA). Your chosen broker should offer fair spreads, fast execution speeds, and 24/5 customer support.

Some Forex brokers offer gold-stock CFDs for traders interested in trading gold stocks that allow you to bet on rising and falling gold prices readily. In addition, trading gold stocks as CFDs allow you to get started trading with minimal costs, compared to trading the actual gold stocks with a traditional stockbroker.

Most trading beginners are always looking for the best way to trade gold with the mindset that there is a strategy with zero losing trades. Unfortunately, there is no gold trading strategy that does not have some losing trades.

However, traders can learn how to buy and sell gold for a profit by following the gold trading basics, such as being aware of global geopolitical events. Another critical component of trading gold successfully is to have a trading strategy built on technical analysis that allows you to identify the best trading opportunities.

You can trade gold using various instruments such as gold futures and CFDs, options and gold stocks. However, the most popular gold trading instruments are gold futures and CFDs.

You should always trade with the trend given that they present the best trading opportunity to most traders. Markets tend to trend for long periods creating excellent profit opportunities for traders who are following the trend. Many traders who fight the trend usually end up losing since betting against the trend requires advanced skills.

The Time Frame you trade is also a crucial part of your overall trading strategy. You should choose a trading timeframe that is aligned with your schedule. Those who do not have a lot of time to sit on their computer during the day should focus on trading the 4-hour and daily timeframes.

Traders who have constant access to the markets and can trade during the day could be successful day traders.

Those who are trading the markets as a side hustle should also utilize the higher time frames such as the 4-hour and daily charts.

The first step is to identify potential trade areas such as support and resistance zones, which you can use to place your trades. You can then take bullish trades when the price bounces off support while executing bearish trades when the price bounces off resistance.

The chart below shows two support lines drawn on the daily gold chart. The first support line has been broken several times in the past and does not represent a good trade location.

On the other hand, the second support level has held for multiple months and is a solid level that is likely to hold in future. Well, the price is approaching the level at the time of writing, and it is likely that it will hold this time as well.

Gold support levels.

Always keep abreast of what is happening in the global political arena and the stocks and currencies markets since some of these events significantly affect gold prices.

Beginner traders should keep in mind that every trading strategy has losing trades and streaks, which they should not be afraid of if they want to become successful traders over the long term.

Trading off support and resistance zones seems like a straightforward trading strategy, and it is. Yet, it is a strategy used by all traders, from beginners to advanced traders, which is what makes it so effective.

Some brokers, such as ATFX, will send you daily gold trading tips and strategies issued by their trading experts, but it will still be up to you to implement the online trading strategies correctly. Still, you should remember that even the top traders have losing trades. With ATFX, you have access to Trading Central and Autochartists, which are premium add ons to the popular MetaTrader 4 platform that improve your overall trading experience. You can use both add-ons as a source of trading ideas.

You should always backtest your chosen trading strategy to ensure that it has worked in the past, which increases the chances that it will work in future. Another commonly overlooked aspect of trading is a trader’s mindset. You should constantly work on your mindset to help you hold on to your winners for longer while quickly cutting your losing trades short.

Having a solid mindset will contribute significantly to your trading success than having a high win rate with a trading strategy.