How to Start Trading or Investing in Gold

Learn What is Gold Trading or Investing?

The practice of buying and selling Gold stocks by speculating the market is called Gold Trading. It is conducted via a trading platform, and various technical indicators are utilized to predict the market trend.

However, in spot metals, investing & trading in gold need not be the same concept. In online gold trading, one may or may not own the physical asset, while in investing, one doesn't have to hold the physical asset.

Is trading Gold profitable?

Trading spot metals or gold is profitable because it is a dollar-denominated commodity. One of the most interesting facts is that its price rises with inflation. It directly leads to the fact that investors can make money during inflation.

What moves the Gold Price?

The moving forces behind the Gold market come from a variety of aspects. It can be financial, geopolitical & sentimental too. The underlying factors like supply-demand, trader & investor behavior, consumer choice, and purchasing power & inflation all work together. Factors Affecting Gold Prices

Since the quantity of Gold is limited as a resource, which makes it valuable as Gold has no dependence on any other bank, it is a precious metal no matter where you take it.

1. When inflation rises, it creates a fear of an economic crisis from the investors' perspective. They rush to buy gold stocks since it is a good hedge against inflation.
2. Gold is a noble metal, and it does not rust or degrades. It is inexhaustible, unlike oil. Citizens of countries like China and India consider Gold as a store of value. They usually do not participate in gold trading, but they are more interested in physically buying the asset. When the price of Gold rises in the market, its jewellery demand falls in that region.
3. The Central banks hold a major weightage in moving the price of Gold as they have foreign exchange reserves, and when the economy runs stable and sound, these banks tend to sell some portion of their Forex reserves since Gold is a dead asset to them, it is not giving them any return, unlike bonds and money.

But the major problem lies here: Central banks usually release Gold when the investors aren't much interested in buying it. Due to this, the Gold stock price fell. However, banks have made some amendments and even agreements like the Washington agreement to manage this issue.

Trivia

The Washington Agreement was signed on September 26, 1999, by 14 nations to limit the sale of Gold for each country to 400 metric tons per year. The second version of the agreement was inked in 2004, then extended in 2009.

This treaty is often regarded as a gentlemen's agreement. Moreover, unloading too much Gold in the market negatively affects the bank's portfolio.

1. Exchange-traded funds (ETF) are another major factor behind moving the market. ETF allows investors to buy Gold without mining the stocks. The ETFs are the major gold buyers. Moreover, they also reflect the absolute price of Gold.
2. Investors also have a specific rationale for buying gold stocks as it is a reasonable diversification of the portfolio. However, this does not that Gold is always profitable to buy. But a trader recognizes what it can do and what not.

For example, the Gold prices were topped out in 1980 and hit nearly $2000. Those investors who invested in Gold then, still losing money since. On the other hand, those who have invested during 1984 and 2005 made more profit.

Also read: Beginners Guide: Learn how to Invest in Spot Metals

Tip: The total number of gold ounces one holds in their portfolio fluctuates with the price movement. So, if a trader wants to have 5% of the portfolio in Gold, it is necessary to buy when the price falls and sell when the price goes up.

1. The purchasing power of Gold remains constant and unrelated to its current value.
2. The economic condition means the current state of the economy in a country or region. It also incorporates the Economic cycle & business cycle & depicts the expansion or contraction of an economy. It can be sound or positive or fluctuating.

The economic data represents the country's unemployment rates, GDP growth rate, monitory & policies policy. Among all of them, Monitory policy dominantly influences gold prices controlled by Federal reserves. These Federal reserves can alter the interest rates, creating an "Opportunity Cost" among investors. It means giving up a near-guaranteed gain in one investment for a potential of a more significant gain in another.

Difference between Trading vs Investing in Gold

Both are different terms in their context. So, let's see below what are the actual factors on which both terms act separately in the gold market.

How to start trade in Gold with CapitalXtend

You can start trading in Precious Metals by following these steps:

1. Create a live trading account.
2. Fund your account.
3. Download Trading Platform
4. Open your entry position
5. Monitor & analyze your trade using technical and fundamental analysis.

Create your Gold Trading Account

At MyCapital, the traders' room, one can easily trade spot metals as well as Forex, Indices, & Spot energies. They can easily find their account and download the trading platform. After that, you can open a position for your spot metals trading.

Start Trading Gold with ultra-tight Spreads

CapitalXtend offers ultra-tight spreads to its clients. If you are new to trading, you must know that spreads mean the difference between two price rates. From the point of view of trading, a spread is a difference between an asset's buy (offer) and sell (bid) prices. The spread is an essential part of CFD trading, as it is how both derivatives are determined.

Take a look at the overview of CapitalXtend’s trading accounts with ultra-tight spreads.

Takeaway

Precious metal is an excellent option to diversify your portfolio. It is a safe haven during a time of inflation. However, one must prepare a complete line of action in terms of strategy and planning before entering into trading.