Gold takes its place amongst the precious and rare earth elements. Since periodic times it has been one of the noblest assets kept by the wealthy as a tradable asset. With the development of the internet and financial technology, the trading mode was shifted from physical to digital, where all the transactions are conducted online.
In currency trading, we represent Gold as XAU and pair it with other financial instruments such as USD and EUR. It is the primary choice for trading for many retail and professional traders. Our article will discuss all the characteristics of gold trading so that you can get a better idea of the investment.
Trading Types
We can trade Gold in multiple forms to help with diverisification. Some of them are listed as follows.
● Physical. Physical ownership of the yellow metal has been a common practice for thousands of years. Investors can sell it for a higher price by purchasing and holding the metal.
● CFDs. Trading Gold via CFDs does not require any physical ownership of the asset. Traders can use their trading strategies and proper risk management to open positions on both long and short sides.
● Certificates. Gold certificates allow you to hold the metal in paper form. It is possible to trade it later on for actual money.
● Futures. A futures contract is a legal agreement between a broker and a trader that allows the latter to sell the instrument later. Gold futures are available in respective exchanges that come under authorities' regulation.
● Mining companies. Mining companies list their stock on the exchange, which rises and falls according to the supply and demand of Gold and the company's performance.
Features of Gold
Gold has the following characteristics that traders should understand before placing any trades.
Price Movements
Gold is more volatile than any currency pair in the market. It can jump a few pips within a matter of seconds.
Pip
The pip size of Gold varies according to the pairing. With the greenback, each pip is equivalent to 0.1. To understand better, let us consider an example where a trader places a buy position on XAUUSD at 1800.00 for one lot. As the metal jumps to 1801.00, they will earn $100 in profit equivalent to 10 pips.
Spikes
The price of Gold is controlled by a global factor of supply and demand. No single entity can influence the precious metal, which makes it free from spikes and irregular jumps.
Gold Trading Strategies
Several strategies revolve around trading Gold which includes technicals on the bigger side. Fundamentals are also helpful when Gold is paired with currency pairs. The price can also experience a fluctuation if major gold mining countries such as China and the United experience a shift in their economy or mining.
While talking about technicals, it is vital to consider support/resistance, supply/demand zones, trend lines, market structure, and indicators.
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