Gold is the best tool to protect against major global financial problems. One of these problems is inflation. This is because the price of gold tends to rise when inflation rises. Trading gold allows you to expose yourself to one of the largest commodity markets in the world.
In addition, since gold is so important to our economy and technological development, it helps you to be part of something really interesting. In terms of long-term stability, gold is the best precious metal to trade because its price is relatively stable compared to other metals. For example, in times of economic recession or global financial instability, the value of gold does not usually decrease as much as other metals such as silver or platinum. That said, traders own both gold coins and ingots, as production costs demand a distinction in quality and value between the two assets.
For example, a day trader could trade a break in gold on the M15 chart, while a swing trader could place a trade based on a breakout (same pattern) on an H4 chart. However, keep in mind that CFDs are prohibited in the United States, so you may need to use other ways of trading gold, such as gold futures or ETFs, for example. Some traders track the historical relationship between the price of gold and the price of gold stock indices, such as the Philadelphia Gold and Silver Industry Index (XAU) or the AMEX Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI). They operate in the stock market just like regular stocks and offer indirect exposure to the price of gold.
These instruments derived from gold trading allow traders to speculate on future movements in the price of gold by purchasing publicly traded contracts. Some gold and silver traders choose to track this relationship and develop pair trading strategies based on which asset is cheaper relative to the other. Many traders assume that fear drives the yellow metal and take the plunge, believing that the excited crowd will cause the price to rise blindly. Exchange-traded funds (ETFs) invest in several gold-related assets and instruments, including physical gold, gold futures and different gold mining companies.
Some forms can be expensive to trade or store if you physically trade gold, such as ingots and bullion coins. While gold is often considered a low-risk speculative asset, diligent forecasting and an accurate timetable can make gold a profitable asset for short-term trading. It's the most popular precious metal to trade, with billions of dollars worth of gold being exchanged every day. Scalpers and day traders may prefer to trade gold during these sessions, as the spreads will be the lowest and the number of trading opportunities will be greater than during the traditionally quieter Asian session.
A popular opinion among traders and economic analysts is that higher interest rates lead to lower gold prices. Market players face high risk when trading gold as a reaction to one of these polarities, when in reality it is another one that controls price action.