|Symbol||XAU or Gold|
|Famous pairs||XAU/USD and XAU/EUR|
|Average spread||3 pips|
What is gold?
Gold is a yellow precious transition metal having an atomic number of 79 found in rare quantities over our planet Earth. It is known for its excellent qualities such as lush feal, good malleability, and corrosion resistance. Due to gold’s significant properties, it is used as a primary choice for making jewelry, art, and electronics. In financial terms, you can see gold listed on the major exchanges with the metal as the base and currencies on the quote side. The price of XAU/USD reflects one troy ounce in contrast with the United States dollar.
A brief history of gold
The history of gold dates back up to 4000 BC where modern-day Eastern Europe used it to make objects of appealing value. Two thousand five hundred years later, the precious metal became a primary object of use by the Egyptians as they started mining it in large quantities. Since then, various civilizations have utilized the metal, which increased its demand to a considerable extent. The famous gold rush in the 1850s and abolishing the gold standard at the end of world war I are a few key events for gold.
Trading strategies for XAU/USD
There are tons of trading strategies, EAs, and indicators built around XAU to capitalize on the high volatility and liquidity presented by the metal. Let us highlight a few different techniques which a trader can use to trade gold:
To trade based on an economic event, you have to note the supply and demand, inflation of the quote currency, and central banks. For, e.g., during the great recession, investors were seen rushing towards stable assets such as gold, causing an increase in its price.
Technical traders who use price action plot support and resistance, trend lines, Fibonacci intervals, and supply/demand zones to take a buy or sell. The most popular time frames are daily, H1 and M15. Traders can also use indicators such as moving averages, RSI, Bollinger bands, etc.
You can find many automated trading software specifically coded to trade on gold at the industry standard Metatrader platform. Make sure to note drawdowns, percentage gains, and any associated warning before buying a robot.
A few tips to trade on gold
Here are a few tips that you can incorporate to increase your trading consistency while trading gold pairs :
- Use proper risk management. Do not invest more than 5% on any single trade.
- Trade using appropriate leverage.
- Use a mixture of fundamentals, technical, and sentiments to trade.
- Do not forget the notion “Plan the trade, trade the plan.”
- Take a look at the US dollar index, which has an inverse relationship with gold.
- As gold can be highly volatile, it is essential to keep your emotions under check while trading.
Why should you trade on gold?
Gold offers unique opportunities and an excellent trading environment with its bull or bear market. It has a good market cap, volatility, and liquidity, which investors can capitalize on easily.
What are the different forms of gold you can trade?
You can trade gold in physical state, gold ETFs, sovereign gold bonds, digital gold, and in the form of a currency pair.
Are there any significant factors I should note before trading gold?
Yes, a trader should be wary of any financial crisis, supply-demand disruptions, inflation, incoming news, and financial regulations.