Gold Trading Strategies and Technical Indicators – An Overview

Gold is a playing a crucial role in the financial market, since the ancient age. Since then, this metal is treated as the synonymous of luxury and power. Gold was used as a currency for several countries, and it was also used to make religious idols. In fact till 1971, the USD was pegged to gold. The central banks hold a huge deposit of gold for emergency purpose. As an effect of the great depression, the gold rate was fixed at 35 dollar/ounce the Roosevelt administration. But in the year 1971, this rate was removed by Nixon administration. During this administration the gold rate was increased more than 2,200% and the price was fixed at $800.but in the year 1999, the gold rate again fell down to 260 dollar. Within a few years, price of gold began to rise again and finally the price of gold has been fixed at $1,226/ ounce.

The above function has brought a significant change in gold metal trading, and it is widely used in the financial trading. An expert gold trader follows several strategies to trade gold spot prices. A few of them are discussed below:

1.       Fundamental and intermarket Strategies:

Since gold is an asset that is traded in the commodity, the prices of this metal can depend on several factors like demand and supply. Other two factors that are also crucial in pricing gold is monetary and fiscal decisions. If you are a gold trader, you should have a holistic approach about the basics of the gold trading. This will help you to know when to enter or exit the trade.

2.       Technical Strategies:

If you are a day trader, gold trading is just perfect for you. This is because you can get good returns by executing this trade. Remember, you have to follow a certain trend, which is followed by gold, to enter a position.

  • Trend analysis:

Trend analysis is one of the most important steps to recognise the trend and trade in gold. There are multiple trend analysis indicators available in the market that enables you to do so. If you want to do short-term trades, you should identify the support and resistance levels.

  • Trendlines:

Another important tool of gold trading is trendlines. The role of these tools is to confirm other technical indicators (that are generated by Relative Strength Index (RSI) and MACD). If you want to develop an upward trend, connecting a series of finding a support opportunity and rising bottoms can be the best strategy for you. On the other hand, connecting a series of highs can create a downward trend.

If you want to trade gold successfully, you should have proper understanding about the trends and divergence. This will help you to take right entry and exit decision at the right time. Also be well aware about the current economical condition.

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