CMTrading CEO, discusses gold’s recent performance and shares his insights on trading the precious metal.
The CEO and co-founder of CMTrading, Daniel Kibel, outlines the potential opportunities in retail trading following gold’s recent tumble.
Thanks to its safe-haven status, gold is the de facto insurance policy for central banks and investors around the world.
“While gold may not yield any interest or generate income like other assets, it delivers value. Therefore, during times of economic crisis, or when inflation is running rampant, gold is an investor’s best friend.”, says Kibel.
Gold tends to rise when the US economy is running hot and the US dollar is losing its purchasing power, but when the US dollar and the stock market are soaring, they drive gold prices down instead.
That being said, the investor sentiment in the gold market and gold demand is also guided by the Federal Reserve’s monetary policy as well.
Should you buy the dip?
“In the current hyperinflationary environment underpinned by massive stimulus packages and monetary easing, gold had an amazing runup – reaching a record $2,000 per ounce in August 2020.
The gold’s rally over the pandemic was also supported by the Fed’s passive stance on inflation. As soon as the Fed announced that inflation concerns would be addressed with a sooner-than-expected interest rate hike, gold fell off a cliff.“
Gold is currently changing hands above $1,800 against the dollar and the big question on everyone’s heads is whether they can buy the dip and profit from gold’s potential recovery.
Current market prices may be highly favourable for an entry in gold, however, we can expect uncertainty to cause prices to fluctuate in the near term.
Kibel states that “while Wall Street is now riding on record highs, the bubble could soon burst spelling disaster for the equities market and the dollar. Gold bulls would be ready to pounce on such an outcome, but investors interested in gold should remember that volatility increases both potential rewards as well as downside risks.”
How to take advantage of gold volatility
The most accessible method for individual investors interested in gold trading is through Contracts for Difference (CFDs). A CFD contract mirrors the live price of gold on the market and can be bought or sold online through a trading platform.
Trading gold with CFDs provides investors with access to opportunities without commissions and hidden fees and also enables them to generate returns even when prices are falling.
Buying gold CFDs makes sense when prices are rising since you can close your position any time to profit from the difference. However, when prices are trending downwards, you can also choose to sell the contract and enjoy the same returns.
Trading beginners are highly encouraged to get in touch with their personal account manager in order to discuss how they can take advantage of price fluctuations in the gold market, and which trading strategy is better aligned with their profit targets and risk tolerance.
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