Gold trading involves the buying and selling of one of the world’s precious metals. It’s used for a variety of goods, and services, and for many centuries, it was a standard economic measure.
Today, gold continues to be invaluable, and the market generates billions for countries with rich deposits.
But what makes gold so important as a global store of value and medium of exchange?
In this article, Finbok explores the fascinating world of gold trading and answers all your pressing questions about the precious metal in the global market.
Gold Trading – Market snapshot, February 2024
Spot gold was up 0.8% to $2100.47 on March 5, marking yet another great week for an asset that’s proving popular in 2024.
When interest rates fall, non-yielding assets like gold and silver typically do well. Following weaker-than-expected US statistics on Friday, more than three out of five investors bet the Fed will lower rates in June, according to data from swap markets.This comes after two years of rising rates. That represents a roughly 10-percentage-point increase from this time last week. Reducing borrowing costs is thought to be one strategy to support the economy.Hedge funds and money managers are mostly responsible for the recent spike in gold purchases.Despite obstacles like the strength of the US dollar, they are eager to reinstate positive bets on the metal.
Gold Trading: Technical Overview: March 2024
From a technical standpoint, continued strength and acceptance above the 50-day SMA will pave the way for a continuation of the recent recovery from the $1,984 zone, a two-month low reached in February
Given that oscillators on the daily chart have been gathering upward traction, the gold price may accelerate its upward trend into an intermediate hurdle near $2,044–2,045 on its way beyond $2100.
Gold Trading: Fundamental Overview: March 2024
March 5 saw the gold price (XAU/USD) rise for the fifth day in a row and reach a new three-month high in the $2,120 range during the opening part of the European session. However, any additional upward movement appears tricky, as traders may opt to hold off for any indications on the Federal Reserve’s (Fed) route toward rate cuts.As a result, all eyes will be fixed on Fed Chair Jerome Powell’s two days of congressional testimony, which begin on March 6, 2024In addition, US macro data that is slated for release at the start of each month, such as the highly anticipated monthly employment statistics or the Nonfarm Payrolls (NFP) report on Friday, will affect the US Dollar (USD) and give the metal a new lease on life.Gold Trading: A Market Staple
The main issue with gold trading is that, unlike other commodities like oil or wheat, it is not depleted or used; once mined, gold remains around the globe.
Regardless of where gold ends up, its chemical nature means that it can never be depleted—it is permanent.
As a result, the supply-demand reasoning that works for commodities like oil and cereals does not apply to gold trading. In other words, even if demand for the metal declines, supply will continue to increase over time.
Until the 1970s, the United States’ monetary system was based on the gold standard.
Proponents of this standard believe that because credit creation is connected to a physical quantity of gold, such a monetary system efficiently limits credit expansion and enforces lending rules.
Gold Trading – Here are the top 5 facts about Gold!
1. Fundamentally, gold trading is seen as a good bet against inflation hedge. Gold is an effective value store against a weakening currency. 2. Gold is the only naturally occurring yellow metal; other metals get yellow through oxidation or chemical processes.
3. The majority of Earth’s gold comes from meteorites that blasted the planet more than 200 million years after formation.
4. The element symbol for gold, Au, is derived from the Latin name “aurum,” which means “shining dawn.” 5. Gold is extremely ductile, with one ounce extending into a five-mile thread and being used in needlework.
Gold Trading: How to buy and sell
The stock market is the simplest way to obtain exposure to gold, as it allows you to invest in the shares of gold mining businesses. Trading gold bullion will not provide the same leverage as investing in gold mining stocks.
As the price of gold rises, miners’ better profit margins can increase earnings dramatically.
If a mining company posts a $200 profit margin when the price of gold is $1,000. If the price climbs by 10% to $1,100 per ounce, the gold miner’s operating margin rises to $300, a 50% gain.
Of course, there are other factors to consider when investing in gold mining equities, such as political risk and the challenge of maintaining high gold output levels.
Gold Trading: How to start trading
There are numerous avenues for investors seeking exposure to gold. It is feasible to invest directly in gold bullion, but the costs of keeping and insuring physical gold can be high.
Investors can also buy shares of mining firms whose stock values are associated with the price of gold or exchange-traded funds (ETFs) that hold the precious metal.
The stock market is the simplest way to obtain exposure to gold, as it allows you to invest in the shares of gold mining businesses.
Investing in gold bullion will not provide the same leverage as investing in gold mining stocks.
As the price of gold rises, miners’ better profit margins can increase earnings dramatically.
There are other factors to consider when investing in gold mining equities. Political risk is a major factor as well as the challenge of maintaining gold output levels.
Gold Trading – Price Performance
Gold trading prices are determined by a complicated set of factors. Because gold is valued in dollars, the value of the US dollar can have a substantial impact on its performance.
A strong dollar makes gold more expensive for buyers in foreign nations, which may lead to lower gold prices.
A weakened dollar, on the other hand, makes gold more accessible for international buyers, perhaps leading to price increases.
Because gold is viewed as a hedge against inflation, the loss in the value of fiat currencies, as well as market predictions about inflation, can have an impact on gold prices.
These variables appear to be reflected in the yellow metal’s recent price history. Despite rising inflation, gold prices fell throughout the majority of 2022, possibly due to the dollar’s continued strength against other currencies.
More recently, with inflation stubbornly persistent despite the Federal Reserve’s efforts to contain it, gold prices have rebounded to more than $2,030 per ounce in February 2024, up from roughly $1,975 per ounce in January.
Bottom line
While gold is a safe bet against inflation, it is far from the only one. Commodities profit from inflation because they have price power. When investing in commodity-based enterprises, the most important aspect is to select low-cost producers.
More conservative investors should also consider inflation-protected assets such as Treasury inflation-protected assets, or TIPS. The last thing you want to do is sit idle—in cash, thinking you’re doing well—while inflation erodes the value of your dollar.
Gold Trading in South Africa: Benefits of Trading with Finbok in 2024
Regulatory Compliance and Security: Finbok follows strict regulatory guidelines to provide a secure and transparent trading environment. Cutting-Edge Technical Integration: The platform combines the newest technical breakthroughs, allowing for speedy and informed trading decisions. Award-Winning Services: Finbok’s services have been acknowledged throughout the industry for their superior customer service, technology, and overall trading experience. Diverse Asset Offerings: Traders can choose from a wide range of trading instruments, allowing them to diversify their portfolios and take advantage of various market possibilities. Educational Resources and Support: Finbok provides substantial educational materials for both novice and seasoned traders, as well as excellent customer service. Advanced Risk Management Tools: The platform includes sophisticated tools for effective risk management, which is an important feature of trading, particularly during turbulent periods such as earnings season. Competitive Spreads and Low Fees: Finbok provides cost-effective trading, which is critical for maintaining profitability, particularly among frequent traders. Community and Networking Opportunities: The platform includes a trader community, which allows for networking and strategy sharing, thereby improving the entire trading experience. Continuous Innovation: Finbok’s services are regularly updated, ensuring that traders have access to the most up-to-date and efficient trading tools and information.
