Gold is the asset par excellence when it comes to investing in something safe, which offers the possibility of preserving one's capital and, why not, growing it. Not surprisingly, it is considered the best safe-haven asset in circulation.
Trading gold, however, is not at all simple, especially if the goal is to speculate and generate profits. So, here is a comprehensive guide.
Trading with Gold: Pay Attention to the Instruments
Unlike currencies, which are "digital" assets, so to speak, gold cannot be traded directly. Of course, buying real gold is possible, but in this case, it would go beyond the dynamics of trading. The truth is, therefore, the following: to trade gold, it is necessary to use derivative instruments. The choice is generally between three products. Here they are.
Futures. The term "Futures" refers to contracts that bind a buyer and a seller. The agreement consists of formalizing the purchase and sale of the underlying gold at a certain date and at a certain price. Futures are instruments for capital protection, as the purchase and sale takes place at the predetermined price and not at the market price, thus providing a certain protection against price variations. However, it is also a highly effective speculation tool, as it allows for the production of significant surpluses, i.e., buying low and selling high. The Futures market is regulated, and contracts are standardized so that they can themselves be traded as if they were assets.
CFDs. Forcing the hand a bit, CFDs can be considered as a "free" and slightly more anarchic variant of Futures. They are traded in unregulated markets, which are officially called "Over The Counter". They are not standardized, and the conditions that govern them are at the discretion of investors.
Binary Options. The binary options market is experiencing great diffusion, and the reason can also be found in the possibility of trading the famous yellow metal as an underlying asset. When trading with binary options, it is important to specify that one does not own the asset but rather a financial product whose value depends on the price of the asset itself. In essence, when trading with binary options, the trader must "bet" on whether the price of the underlying asset will increase or decrease at the time of expiration. If the prediction comes true, then they earn a percentage of the invested capital; otherwise, they lose everything (or almost everything).
How to Profit from Gold
To profit from gold trading, it is important, first of all, to choose the derivative instrument that best suits one's trading style. Subsequently, it is necessary to engage in technical analysis and fundamental analysis.
Technical analysis follows the same dynamics as all other assets, so it is not necessary to give specific indications. However, the discourse is different for fundamental analysis. The price of gold, in fact, reacts to certain market movers, and in a different way than currency pairs do.
Certainly, it is important to look at the announcement of
interest rates. The influence, in this case, is indirect but strong. The influence is evidenced by a simple phenomenon: when the interest rate is raised, the currency becomes a more appealing investment object, depriving gold of the space it had up to that moment. An increase in rates generally corresponds to a depreciation of gold; a decrease in rates, on the other hand, corresponds to an appreciation of gold.
Geopolitical problems. Gold is not only a speculation tool but also, and above all, a capital preservation tool. In short, gold is the classic safe-haven asset. Therefore, it is very susceptible to events that produce uncertainty. It is necessary to look at geopolitical events: if the climate tends towards uncertainty, then gold is bound to appreciate.
Macroeconomic data. For the same reason, if the economy worsens, the climate becomes more uncertain from an economic point of view, so investors focus on gold and support its price.
