Gold, or as it is called “the yellow metal,” is considered one of the most valuable precious metals around the world. To obtain it, wars and conflicts lasted for a long time and claimed thousands of people’s lives. Many investors tend to trade and invest in gold, and this is what we will cover in this article and identify the factors affecting gold trading.
In the past, gold was the way of commercial exchange between people before paper currencies appeared. Still, today, with people dealing with paper currencies, gold has become less valuable, yet it has not lost its luster, as it is one of the most important safe havens in times of wars and conflicts.
Central banks were required to print quantities of a particular currency – keeping the corresponding gold – to preserve this currency’s value. Otherwise, the value of money would be the value of the paper and ink it was printed with, leading to a significant disruption of the global banking system.
But an observer of economic affairs finds that there is manipulation occurring by significant economies and entities. This brings back to the memory of what happened after the financial crisis in 2008, which was termed as quantitative easing within the easing policy pursued by central banks.
This policy resulted in printing hundreds of billions of dollars to save large institutions and companies from collapsing without depositing the corresponding gold. This is logic, and economics will have serious repercussions that may affect the global financial system unless this problem is overcome.
How to trade the gold
Today, traders from anywhere in the world can speculate in gold: buy and sell gold over the Internet by speculation. As we mentioned in previous articles, the concept of speculation means betting on an increase or decrease in prices and entering into deals accordingly. When speculating in gold, and if the trader’s expectations are correct, the difference between the number of points will win when the deal is opened and closed. The exact opposite happens if the trader’s expectations were wrong.
Away from the rule of gold trading online, trading in gold is a unique opportunity. It is characterized by a great degree of stability and is subject to technical and economic analysis principles. No power in the world can manipulate its prices. Also, gold is considered a safe haven. People tend to buy it a lot in times of wars and conflicts where currency prices fluctuate significantly, but gold, in return, maintains its stability and stability; on the contrary, its price rises.
Another advantage of trading gold over the Internet is the diversification of the investment portfolio. The trader can combine investment in different currency pairs and precious metals such as gold and silver and many other financial assets. Portfolio diversification is one of the most critical risk management methods and capital management in global financial markets.
Factors affecting gold prices
Gold Trading – Supply and demand
Like other financial instruments listed for trading in the financial markets, the price of gold is mainly affected by the quantities of supply and demand; thus, it is vital to follow the news in this regard. For example, when talking about discovering a new gold mine that contains large quantities of it, this means an increase in supply, which will result in a decrease in gold prices.
But on the contrary, if specific problems occur, such as explosions or collapses in gold mining mines, the quantity supplied will decrease compared to the amount of demand, leading to increased yellow metal prices. Therefore, the trader must be aware of all the relevant information to predict prices accurately and thus enter into successful deals.
The US dollar
The price of an ounce of gold is evaluated in the currency of the US dollar. Its circulation over the Internet is similar to currency pairs, on one end of which is gold and on the other side the US dollar, so we find that the US dollar causes many times, the change in the price of gold.
In general, there is an inverse relationship between the price of the dollar and the value of gold, and this relationship is already more than 90% of the time correct, as the rise in the value of the US dollar is one of the reasons for the decline in gold prices and vice versa. For this reason, all those wishing to trade in gold over the Internet should follow the changes in the value of the US dollar because it will leave an impact on the value of the yellow metal.
Gold Trading – Political factors
Gold prices are clearly and affected mainly by the political factor. We find that its value increases significantly in wars and tensions as a safe haven for investors. Among the clear evidence of this is what was happening every time North Korea conducted new missile tests. In these times, gold prices were flying high and achieving new levels.
Gold prices are positively affected by various economic variables. In this area, it is mentioned that the highest historical value recorded by an ounce of gold was at the level of 1921 dollars per ounce, and that was in the year 2011. This is due to the global debt crisis caused by the financial crisis in 2008, which was The result is also the start of quantitative easing programs.
These are the most critical factors that cause an increase or decrease the gold price and its value. Returning to gold trading, buying and selling of gold over the Internet, we can say that the trader should be continuously informed about these factors due to their direct impact on gold prices.
Besides, the trader must master the principles of technical and fundamental analysis to make correct expectations that lead to successful trades. As we mentioned, gold is considered one of the essential financial tools subject to technical analysis and fundamental analysis principles.
Gold trading times
The working period of the European markets and the American markets’ operational period are the best times for trading gold. If we want to be more precise, we can say that it is when the European markets intersect with the US. Most of the trading operations are concentrated in this period in terms of the momentum of buying and selling processes and the volume of Existing liquidity.