Top Tips for Successful Gold Trading

Gold trading continues to captivate people worldwide, but why? We know it's one of the rarest precious metals, but trading gold is about more than just that. Before we jump into our top tips for trading gold, here are four reasons people buy and sell this commodity:

At TMGM, we offer gold trading CFDs, which means you'll have thousands of opportunities to go long and short. The skill, however, lies in monitoring the price of gold and knowing when to act.

Being able to speculate on the current gold trading prices and go long or short is great, but only if you know which way the market is going to move.

You can give yourself the best chance of predicting which way the price of gold will move if you understand the market, which is why we've put together these gold trading tips.

Central banks often use gold to hedge against currency fluctuations. This relationship between gold and money means that central bank purchases will often result and inflation, largely because central banks rely on printing more currency to buy gold, creating an excess of currency which could devalue it. Although the gold standard is no longer used by central banks as a monetary system, people still rely on gold to mitigate the risks of currency fluctuations.

In this regard, money and gold still have a direct relationship. When currency prices are falling, people typically buy more gold and vice versa. Therefore, when central banks begin buying more gold, it's a sign that currency prices are about to drop. This can drive up the price of gold higher.

Beyond central banks, industries like jewellery and technology also rely heavily on physical gold. When major players in these industries are buying or selling gold, prices move.

Let's say your research reveals that major jewellery suppliers are buying up more gold. This could be due to more demand from consumers, which, in turn, pushes up the retail price of gold. Increasing retail prices could lead to a higher trading price for gold.

In conjunction with the jewellery industry, you can monitor consumer activity in the tech sector. Smartphones and other electrical products contain components made of gold. If buying activity in the tech sector increases or decreases, it could signal a corresponding increase or decrease in the price of gold.

Up to this point, our gold trading tips have focused on factors outside of the trading markets like wider macroeconomics and industrial demand. However, you should also consider sharpening your Technical Analysis skills. By studying the historical patterns and current pricing trends such as price volatility and oscillators, you can make better informed predictions for entry and exit levels.

For example, let's say the price of gold has increased for five days in a row, and its trading volume is high. You can go back and look at all the times this pattern has occurred in the past. From there, you can look at what happened in the following days and consider following that trend.

Historical patterns don't determine future price movements, but they can be an indicator of what might happen. Essentially, you're looking at market sentiment (i.e. how traders are acting) to determine the future price of gold. Some of the technical indicators you can analyse using our trading platform are:

• Gold price volatility
• Trend indicators across multiple timeframes, including hourly
• Oscillators

Expanding on our previous gold trading tip, look for symmetrical triangles on price charts. These patterns are formed by two trend lines moving in different directions. These symmetrical triangles on price charts could indicate periods of market consolidation, where neither buyers nor sellers dominate. Essentially, it's a period of indecision because neither the buyers nor the sellers are clear as to what the price of gold is going to do.

These patterns often coincide with coming price breakouts because buyers will eventually overtake sellers or vice versa. Monitor these triangles for a breakout and follow the trend. This could help you take the right side of a trade before other traders notice the new movement.

An example of the symmetrical triangle can be seen in the August 2024 chart as below.

You'll generally get the best prices when liquidity is high. As we've said, gold trading markets are open for most of the day and night. However, most activity takes place when the New York Stock Exchange (NYSE) is open.

To maximise your trading opportunities, try engaging in gold trading during these periods of higher liquidity, typically when the NYSE is open, to give yourself the best chance of getting high liquidity and low volatility. Like our other tips, this won't guarantee you make a profit. However, it will put you in a better position to reap the potential benefits of trading gold CFDs.

The majority of leading online brokerages give you access to the gold trading markets, but each one offers a different selection of features and trading conditions. You need to assess whether or not the brokerage platform meets your needs.

Some of the features to consider are: