Sunday, November 27, 2022

How To Trade Gold Stocks

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Gold Trading Market Hours

FREE Trading Lesson: How to Trade Gold Stocks (and Silver Stocks) For Profit!

Key trading times around the world may vary, but the popular commodity is almost always available. Below weve detailed the crucial opening times and trading hours of some of the main gold exchanges.

  • Online trading hours in London, UK Opens 08:00 17:00
  • Online trading hours in New York, USA Opens 13:20 18:30
  • Online trading hours in Mumbai, India Opens 04:30 18:00
  • Online trading hours in Dubai, UAE Opens 04:30 07:30
  • Online trading hours in Jakarta, Indonesia Opens 02:30 10:30
  • Online trading hours in Islamabad, Pakistan Opens 05:00 13:00

Note gold trading times may vary over weekends and holidays. And while not listed above, online gold trading hours in Australia, New Zealand, South Africa, Thailand, Canada, The Philippines, and Europe run almost 24 hours a day.

How Central Banks Influence The Price Of Gold

All Central Banks own gold. This is due to golds historical association with banknotes and coins. In the past, a coin or banknote could be redeemed in exchange for gold. Lets take The Bank of England, for example. They hold around 400,000 bars of gold, this is worth over £200 billion.

The Bank of Englands Gold reserves Gold Bullion source: bankofengland.co.uk

These days, the gold reserve is justified by the fact that the value of gold behaves differently than the foreign currency reserve.

Gold is held by reserve managers for diversification purposes since both the value of gold and foreign currency reserves are more stable together than the value of gold reserves and foreign currency reserves are separate. Gold can also be used to fund emergency liquidity assistance or foreign exchange interventions, among other things.

Furthermore, Central Banks pay particular attention to general economic conditions when deciding how to trade gold in their possession. This means that Central Banks have enormous pricing power in gold, which could be potentially dangerous to other market participants, and to gold producers. We will show you how you can get signals for this later in this guide.

Collectively, at the end of 2014, central banks held around 30,900 tonnes of gold: approximately 20% of all the gold ever mined. These holdings are highly concentrated in the advanced economies of Western Europe and North America, a legacy of the days of the gold standard.

How Much Money Do You Need To Trade Gold

The amount of money you need to start trading gold is dependent on your country of residence. This value also varies from broker to broker.

However, a trader needs $2,000 to trade a standard Gold Future in a day. This amount is known as intra-day margin and isnt uniform among brokers. Notice, also, that the intra-day margin is not fixed but is subject to change. Aside from this sum, the traders need additional funds to take care of losses when trading gold.

Some experts suggest that a potential trader needs $5,000 to start trading this commodity. They argued that the smallest gold future contract has a market value of about 33 ounces of gold. Trading a single contract will require about $5,000 to cover all expenses. So, gold trading is capital intensive.

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Is Gold A Safe Haven For Traders

Traders have referred to gold as a financial safe haven in the past, although this is not the case. Gold has been used as an store of value in times of inflation, although gold prices have a volatility trend of their own â this means that gold is by no means safe. Gold prices may not move in direct correlation with the rest of the worldâs commodity prices, so rather than a safe have, gold may simply be considered as an alternative store of value.

How Can I Make Money Trading Gold

Is the Stock Market a Driver of Gold Prices?

Trading Gold can be a very profitable exercise.

As with all trading, you will need an effective strategy to anticipate market trends. If you have made a plan and have a strategy you wish to execute then, plan out when you will make your trade.

Gold is considered a safe haven asset, however Gold, as with all trading, carries a high level of risk there is never a guaranteed return.

Practice, learn, plan, manage your risk, research, trade.

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What Is Gold Trading

Gold trading is the practice of speculating on the price of gold markets in order to make a profit usually via futures, options, spot prices or shares and exchange-traded funds . Usually, physical gold bars or coins are not handled during the transaction; instead they are settled in cash.

There are a number of reasons why you might decide to trade gold, including pure speculation, wanting to buy and take ownership of the physical gold, or as a hedge against instability.

When trading gold, you dont necessarily need to hold the traditional mantra of buy low, sell high, as you can go long and short on gold prices taking advantage of markets that fall in price, as well as those that rise. Whichever position you take, the aim of gold trading is to predict which direction the market will move in. The further the market moves in the direction youve predicted, the more youd profit and the more it moves against you, the higher your losses.

Ready to start trading gold? Open an account today.

Gold Investing With Inflation And Deflation

Inflation is often a sign of a growing economy, during which time central banks will introduce more currency into circulation. This, in turn, will lead to a devaluation in the currency, as more notes become available. Investors subsequently flock to gold, which maintains its value during inflationary periods, leading to a rise in the price of the precious metal. Conversely, during times of deflation, gold is no longer sought as a hedge, and its price falls as investors move to other assets.

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Use Futures And Options To Invest In Gold

Of all the ways to invest in gold, the riskiest is trading futures or options contracts, a form of speculative investing. Futures and options are derivatives, meaning their value is based entirely on the price of an underlying asset.

A futures contract is an agreement to buy or sell a security for a set price on a certain date, regardless of the current market conditions. An options contract, meanwhile, is an agreement that gives you the option to buy or sell a security if it reaches a certain price on or before a certain date.

In order to invest in futures or options, you need an account at an online broker that offers these vehicles. Many online brokerages allow for trading in these securities, but they may require account holders to sign additional forms acknowledging the risk of investing in these derivatives.

Once youve established a brokerage account to trade options or futures, you can buy and sell them directly via the platform. Most platforms charge a commission for all options and futures trades that varies based on the number of contracts you buy or sell.

People who choose to invest in gold via options or futures contracts need to actively monitor their holdings so they can sell, roll over or exercise their options before they expire worthless. In addition, each of these options includes a certain degree of leverage, or debt,;by default, so investors who overuse them and experience market losses can see their losses mount quickly.

Forex Vs Gold Trading

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Your decision about whether to buy currencies or gold will ultimately come down to your risk appetite and trading goals.

Foreign exchange, known as forex, is the largest financial market in the world, accounting for approximately $6 trillion in daily trading volume. Due to the high levels of activity, forex is extremely volatile so although it comes with a vast amount of opportunity, it also has high-risk.

Gold trading is known for its stability, which has made it one of the most popular investments for storing wealth. While forex traders might focus on short-term price fluctuations, most gold traders will look to take advantage of longer-term trends.

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Know How To Evaluate A Stock

This seems pretty self-explanatory, but you have to do your homework in order to find the right undervalued stocks.

Remember, this is a topic they write entire books on, but well give you some quick starting points. First, understand the traits of the companies youre looking at:

  • Profitability
  • Growth
  • Liquidity
  • Solvency
  • Valuation

Such traits can be appraised using a multitude of tools but be aware not every tool is useful in every situation; avoid the old To the man with a hammer every problem is a nail cliché. Lets cover some of tools that will start giving you understanding of the above traits.

Choose Whether To Go Long Or Short On Gold

When you start trading gold or gold-linked assets via CFDs, youll be able to choose between buying and selling the market also known as going long or short. Youd buy if you expected the assets price to rise in a given timeframe, and youd sell if you thought its price was going to decline.

To understand which way the market is likely to move, its important to do thorough research both technical and fundamental.

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What Time Does Gold Stop Trading

Unlike other daytime markets, gold trading is open to traders 24-hours-a-day. That said, some derivatives markets like futures have set trading times that are defined by the exchange theyâre traded on. For example, CMEâs COMEX Gold futures trade from Sunday to Friday between 5:00 pm and 4:00 pm . That said, brokers like IG.com have a 24-hour Gold Futures market.

How To Trade Gold In Modern Age

Stock Market

It is safe to say that gold has been a store of value of wealth for ages. However, the idea of how to trade gold for investment is one that has always created lots of debate. While a school of thought believes that gold as an investment does not serve the purpose of investment, another believes that precious metals can serve the purpose of protecting against loss of confidence in financial systems.

Generally, investors in the United Kingdom have different pathways of investing in gold depending on their interest.

This article on how to trade gold takes a look at the options available to an investor which includes investing in the physical asset, buying gold exchange traded fund that replicates, investing in gold mining stock, streaming companies and trading gold futures.

Each of the investment options offers different characteristics and what is suitable for you depends on your overall investment goal in the gold market.

1. Physical Gold Bullion

The investors looking to invest in gold as a way of diversifying their portfolio, owning gold bars or coins appears to be the best option. Gold bullion can be purchased from government mint or private dealers in precious metals.

2. Gold Exchange-Traded Funds

Gold ETFs provide some of the identical defensive-asset-class features as bonds, and numerous investors adopt them as insurance against the economic and currency devaluation and political instability.

3. Gold Futures Contracts4. Gold Mining Stocks5. Gold Streaming Companies

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Fundamental Factors In Gold Trading

The history of gold has seen investors consider various fundamentals when trading the asset. Granted, gold has limited intrinsic value, but it is a rare metal that humans have throughout history attached massive value to. The shifting perceptions are based on a wide range of issues, all of which have contributed it its price volatility.

Here are some of the fundamentals to be considered when trading gold:

In addition to fundamentals, gold prices are influenced by technical factors such as:

Bear in mind, that trading in this market, like any other can involve risk and you should never invest more than you can afford to lose.

Buy Stock From Royalty And Streaming Companies

Another way to indirectly invest in gold is to buy stock from royalty and streaming companies, which are companies within the mining industry that serve as financiers for mining companies that are looking for economic support for exploration and production projects. They then receive royalties on anything the project produces. Investors tend to prefer these companies to straight up mining companies, since they dont have to deal with the logistical risks of running a mining company and can therefore avoid a lot of economic pitfalls.

But like any other stock, there are still risks associated with investing in royalty and streaming companies, and investors need to do their homework or invest in a specialized fund in order to confidently invest in gold through this avenue.

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What Moves Gold Prices

Before we look at the best gold stocks to trade, it is important to have an overview of what moves gold prices in the first place. Unlike other metals like copper and aluminium, gold price tends to move according to the US dollarand the overall interest rates or monetary policy in the United States.

How To Trade Gold Cfds

How To Trade Gold ETF’S | Penny Stock Investor

Contracts for difference allow traders to speculate on gold prices without actually owning physical gold, mining shares, or financial instruments such as ETFs, futures, or options.

The value of a CFD is the difference between the price of a gold instrument at the time of purchase and the current price. Learn more about how CFDs work and where you can trade them in our CFD Trading Guide.

The price difference can be based on the likes of goldâs spot price, gold ETFs, gold futures, and gold mining shares.

How Do CFD Traders Get Started?

CFD traders open an account with a broker and deposit funds. The funds serve as a margin against the change in the value of the CFD.

Trading gold CFDs doesnât include storage costs, since there is no physical trading involved.

However, CFDs are still high-risk financial instruments, and your capital is at risk so you should be an experienced trader or seek out a broker that offers a demo account to allow you to develop your knowledge in advance of risking real money.

IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.

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Gold As An Investment

Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a way of diversifying risk, especially through the use of futures contracts and derivatives. The gold market is subject to speculation and volatility as are other markets. Compared to other precious metals used for investment, gold has been the most effective safe haven across a number of countries.

How Trends In The Usd Affect The Price Of Gold

When learning how to trade gold you need to understand how gold is priced and how the USD influences this.

Since gold is quoted in USD/ounce, it should be logical that dollar strength or weakness will affect gold prices. In particular:

  • Gold prices tend to increase when the USD gets sold. That is because, in relative terms, Gold becomes more expensive.
  • Gold prices tend to decrease when the USD gets bought. That is because, in relative terms, Gold becomes cheaper.

Below we have the visual description of the gold price and USD correlation dynamic.

Gold prices and USD correlation, source: macrotrends.net

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Monitor Your Trade And Close Your Position

Once youve opened your position, you can monitor your profit and loss in the positions section of our platform.

While your position is open, you should keep up to date with news and continue performing technical analysis so that you can identify key turning points in the market.

When you decide its time to close your position, you can click close.

Etfs That Own Mining Stocks

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Dont want to dig much into individual gold companies? Then buying an ETF could make a lot of sense. Gold miner ETFs will give you exposure to the biggest gold miners in the market. Since these funds are diversified across the sector, you wont be hurt much from the underperformance of any single miner.

The larger funds in this sector include VanEck Vectors Gold Miners ETF , VanEck Vectors Junior Gold Miners ETF and iShares MSCI Global Gold Miners ETF . The expense ratios on those funds are 0.51 percent, 0.52 percent and 0.39 percent, respectively, as of July 2021. These funds offer the advantages of owning individual miners with the safety of diversification.

Risks: While the diversified ETF protects you against any one company doing poorly, it wont protect you against something that affects the whole industry, such as sustained low gold prices. And be careful when youre selecting your fund: not all funds are created equal. Some funds have established miners, while others have junior miners, which are more risky.

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Gold Trading For Beginners

For dummies, gold trading 101 is to first focus on trading gold only. Next, consider market sentiment. If the market view today is looking up, the price of gold is probably going to come down.

Alternatively, if the market outlook is bleak, expect a rise in price. Start with this straightforward gold trading strategy.

As your confidence and returns from trading using gold grow, consider the demand for jewellery for cash.

Keep a particular eye on live demand in China and India, where gold jewellery is used as a long-term investment vehicle. This could indicate future price trends.

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