Did you know that you can add shine to your portfolio by adding gold to it?
Gold has been a valuable and sought-after commodity for centuries. Its timeless appeal has made it a popular investment choice for traders across the globe.
Gold is often seen as a safe-haven instrument and a good hedge against inflation. In May 2023, gold (XAU) spot prices touched record highs owing to growing demand. The rising probability of recession, inflation still beyond Fed’s target and possible pause in future rate hikes have increased the demand for the yellow metal.
Gold trading is a popular choice for investors who seek a stable, low-risk, and long-term investment.
In 2023, you have many ways of trading gold. In this blog, we will explain the basics of gold trading and provide some tips on how to trade gold this year.
What is gold trading?
When you are speculating on gold prices, by either buying or selling gold with the intention of making a profit from the changing prices, you are trading gold. There are many instruments available in the market that facilitate gold trading. Gold can be traded in a variety of ways, including physical gold, futures and forwards, gold (XAU) ETFs, gold (XAU) CFDs and more.
If you want to trade gold in the UAE, there are plenty of online trading platforms you can opt for. Most of these platforms enable you to trade gold from the comfort of your home.
But what must be kept in mind while trading gold? You can follow the steps below to learn how you can trade gold.
How to trade gold?
- Understand the factors that influence the gold price
Being a commodity, the price of gold is often volatile. Before you start trading gold, you should understand the factors that can impact gold prices.
Some of the most common factors that impact the safe-haven commodity are supply and demand, economic conditions, geopolitical events, inflation, the release of key economic data, strength in US dollar, to cite a few.
You should keep an eye on the news and events related to the factors mentioned above so that you can make informed decisions.
- Choose a trading platform
In today’s world, thanks to the internet, you have thousands of online trading platforms that you can use to make your gold trades.
Choosing the right trading platform is crucial for a successful and rewarding trading journey.
Do not always fall for the low-priced platforms. Ensure the platform has a good reputation and is regulated by a reputable authority.
- Always have a trading strategy
There are many trading strategies that you can use when trading gold. Some traders rely on technical analysis, while others prefer fundamental analysis.
Choosing a trading strategy that suits your trading style and risk tolerance is essential.
- Determine stop-loss and take-profit levels
“Don’t get too greedy and don’t get too scared” -Shelby M.C. Davis.
The above quote should be followed when you make your trades. Setting stop-loss and take-profit levels is an essential part of gold trading.
A stop-loss order is an order to sell your gold position if the price falls below a certain level. A take-profit order is an order to sell your gold position if the price rises to a certain level.
Setting these levels will help you manage your risk since high volatility in gold prices makes it one of the riskiest commodities to trade.
- Practice risk management
Gold trading involves risk thanks to the immense volatility that the commodity witnesses, so it is crucial to practice risk management. This means setting the maximum amount of money you are willing to risk on each trade and sticking to it.
You should also ensure that your emotions do not control your trading decisions.
Parting thoughts
Gold trading can be a profitable and rewarding investment option for those who understand the market and have a solid trading strategy with risk management tools at hand.
By following the tips outlined in this blog, you can confidently start trading gold in 2023.
Remember to keep an eye on the factors that influence gold prices, choose the right trading platform, develop a detailed trading strategy, determine stop-loss and take-profit levels, and practice risk management. Happy trading!
