A webinar by dr. FX talks about gold trading strategies, covering its history and drivers of its price such as interest rates, US dollar correlation, and its safe-haven appeal. Technical trading strategies are also discussed, including the impact of real interest rates on gold’s appeal as an investment.

Gold Trading Strategies: How to Trade Gold Effectively

Introduction

Gold has always been a precious metal, valued and sought after by civilizations throughout history. Today, gold is not only valued for its aesthetic appeal but also as an investment product. Trading gold successfully requires a sound understanding of the market and various factors that impact its price. This webinar discusses the different gold trading strategies to help you trade gold effectively.

Gold History – The Origins of the Use of Gold

Gold’s ancient history, as far back as 5,000 years ago in ancient Egypt, saw it used as an indestructible, heavenly metal in religious rites, and used as a symbol of wealth and royalty. However, ancient Egypt had a complex barter system instead of using gold as a currency. The Kingdom of Lydia was one of the first to use gold as a form of currency in the form of crudely made coins known as electrum. Modern history of gold includes the removal of the gold standard from the U.S. economy, causing the price of gold to skyrocket in the 70s before entering a long bear market.

Why is Gold so Valuable?

Warren Buffet has famously criticized gold for its lack of utility, but it is still an attractive investment product for several reasons. Gold is a unique chemical element due to possessing anti-rusting and anti-tarnishing qualities making it durable, along with its being easily malleable, rare, attractive, and highly liquid. Gold is also portable, divisible and impossible to counterfeit, rendering it less susceptible to inflation in the face of fiat currencies that the central banks can manipulate.

Major Drivers of Gold Price

Real interest rates are among the major long-term factors that influence the price of gold. Real interest rates refer to the base interest rate adjusted for inflation, with the logic being that cash and bonds no longer provide a high enough return in the face of low real interest rates, pushing investors towards alternative forms of investment like gold. In contrast, when interest rates rise, other assets like cash, bonds, and stocks gain value and become more appealing than gold.

US Dollar and Gold Correlation

Traditionally, gold and the US dollar had a negative correlation. However, with the 2008 financial crisis, this correlation weakened. During the 1970s and 1980s, when there were high inflation rates in the US, gold was an effective hedge against inflation. However, when inflation is low, other assets such as the stock market and cryptocurrencies become more popular than gold.

Gold as a Safe Haven

Historically, gold has been a popular safe haven for investors during market downturns, where other assets like the stock market may be unreliable. With its enduring value and anti-inflationary properties, gold has long been considered a safe store of value during times of economic crisis.

Technical Strategies for Trading Gold

Technical analysis is a popular method for trading gold. Using indicators such as moving averages, trend lines, and oscillators help provide guidance for effective gold trading. It is essential to consider various factors such as trading volume, news events, and market sentiment when trading gold.

Conclusion

In conclusion, trading gold requires an understanding of the market and the various factors that influence its price, such as real interest rates, US dollar correlation, gold as a safe haven, and technical analysis. Effectively trading gold requires patience, discipline, and risk mitigation strategies. By adopting a sound gold trading strategy, traders can take advantage of the opportunities offered by this precious metal.