Nearly 60% appreciation in gold price in 2020 may have prompted many to enter into the tricky business of retailing in the precious metal but they must know the basics of the trade to succeed in it.
Before we glimpse at the basics of gold trading for the beginners, it is important to know that gold, listed as a tradable asset on several foreign exchange (Forex) trading platforms, is paired with the US Dollar.
Several such Forex trading platforms also pair the yellow metal with global hard currencies like the Euro, Lira, Franc and British Pound. But the US Dollar is the most common one in gold price pairing. It is, therefore, imperative for to know the Gold Trading Basics for Beginners. We are explaining some important tips for them as follows:
Gold Ideal for Trading
For centuries together, gold is considered as the most valuable metal and any other commodity or asset traded in the market must have similar characteristic value-properties making it suitable for trading.
It is the market dynamics or forces that determine the fixation of price o gold. This is depends on the supply and demand scenario of gold making it a highly price-volatile metal.
Therefore, it is imperative that the retail trader in gold have sufficient number of buyers and sellers.
Trading Gold in Finmart (Financial Markets)
Gold is actively traded in the financial markets. This is one of the several forms of trading of the yellow metal including Spot Basis and Futures. Gold is trading as a CFD contract allowing a trader to trade contracts on an asset without owning the underlying asset itself.
Process of Trading in Gold
Gold, used as the main commodity for store of value, is traded using two parameters: fundamental analysis and technical analysis.
The reason for using these market determining business tools is the volatility of price of gold as it is dependent on demand and supply of the commodity and other international developments like depression, pandemics, war-like conditions and actual wars.
How Can You Start Trading In Gold – Key Procedures
Following are the primary procedures of trading in gold:
Opening of a forex trading account with a broker offering the XAUUSD (gold).
Regularly Consult the Long-Term Chart: start with the long-term price movement of gold over a period that can be anything, 10 years or 20 years to offer you a good idea of how the prices fluctuated under different given circumstances.
Adopt Your Trading Strategy: Thoroughly study ongoing price dynamics of fold and see what the main factors that are either lowering or shooting up the prices. You may do Fundamental and Technical analyses.
These are the parameters that one should consider or take into account before plunging in retail gold trade. The necessity of learning the rules of gold trading emanates from the fact that it has its own methodology and they are based on the different unique characteristics of the gold.