Gold Trading
One common method of portfolio diversification is through trading in commodities and precious metals like gold. The guide you need to trade the gold market is right here.
Why Trade Gold?
Diversification
Experienced traders diversify their portfolios to reduce risk. Because the price of gold tends to negatively correlate with stock market indices, trading in commodities like gold is thought to be a great way to achieve this.
A hedge against inflation
Gold is inflation-proof, whereas currencies lose value over time as a result of inflation. Gold prices were hardly impacted by the global financial crisis that hit markets in 2008 and after.
Store of value
Approximately 95% of the gold in the world is kept as jewelry or in bullion vaults , and the supply is expanding very slowly. Because of the laws of supply and demand, its value exhibits little volatility.
What affects gold prices?
Trading Tips in Gold Market
Trading gold in practice
Your analysis leads you to conclude the price of gold will appreciate.
You buy 1 lot (100 oz) of XAU/USD at the price of 1,184.60. One lot equals $100 for every $1 movement in the price of gold.
Winning Scenario
Losing Scenario
The interest in gold spikes and a couple of days later the price is $1,189.70. You decide to sell and lock your winnings. Your profit is calculated as follows: (1,189.70 – 1,184.60) x $100 = $510.
The price of gold does not move your way and the day after the price trades at $1,180.30 . You decide to close the position and cut your losses. The loss in this case is: (1,184.60 – 1,180.30) x $100 = $430.