Gold trading: What you need to know about trading the precious metal this week

Gold trading: What you need to know about trading the precious metal this week 

The main reasons why investors buy gold today are to protect their capital from loss of value in an inflationary environment or in times of economic crisis, and even as a long-term investment. Today we will review the recent performance of gold and the main events that will have an impact on its price in the near future. 

Historically, inflation has been used as an indicator for gold trends. The price of gold usually rises in tandem with an increase in the cost of living. Despite the global health crisis, inflation levels in most economies have remained low and stable in 2020. However, inflation rates are anticipated to rise further in 2021, therefore gold prices are likely to rise as well. 

Trading gold has long been considered a viable strategy amid market uncertainty. When the Coronavirus pandemic rocked the financial markets in the first half of 2020, its price tumbled along with the rest of the commodities market. However, gold prices did not only manage to recover, but by August 2020 reached new record highs, hitting $2,075 per ounce. 

By the end of March 2021, the price of gold had fallen to around $1,680 from a high of $1,950 at the start of 2021. The price of the yellow metal continued its rise from April to April 9, 2021, climbing up to around $1,745. 

However, gold prices tend to drop when the economic backdrop is positive, and investors start moving their capital to riskier yet higher yielding assets. This was confirmed with the release of the latest US non-farm payroll data where the price of gold dropped dramatically. Investors were surprised to see the non-farm payroll figures beat expectations, indicating that the US economy is firmly on the road to recovery. 

The main event scheduled for today that will likely trigger volatility in the gold market is the US Durable Goods Orders report, which is expected to show a drop of 0.3% in July, versus +0.9% a month ago. If the data doesn’t meet expectations, the Fed is also likely to intervene to stabilize prices. 

Next up is Thursday’s Jackson Hole Symposium which is the all-important meeting where the Fed along with central bankers, finance ministers convene to discuss economic issues and inflation metrics.  

Gold is now trading at $1,795 after failing to hold onto the $1,800 level. If bulls manage to stage another rally above $1,810, gold prices are expected to sustain the upward trend toward $1,820. 

On the other hand, if sellers gain the upper hand, we could see prices reel back toward last week’s lows near $1,780.  

Trading gold CFDs 

One of the most advantageous methods of benefiting from gold price movements is to trade gold CFDs online. CFDs or Contracts for Difference are a financial derivative that allow investors to speculate on the price fluctuations of an underlying financial asset such as gold without buying it beforehand. 

Moreover, CFD gold traders can profit both when prices are rising as well as when they are falling. This is because CFD trading allows traders to open a buy or sell position, which means they can buy when prices are moving up or sell when the prices are dropping in order to generate profits.  

Also, CFDs are traded on margin, which means that traders only need a small amount of capital to open a position on the market and enjoy increased returns at the cost higher risk exposure.  

Please note that trading CFDs is considered a high-risk investment, which can result in the loss of your invested capital. Always get in touch with your personal account manager to discuss profit targets and how you can minimize your exposure to downside risk.  

Discover more opportunities with CMTrading    

CMTrading offers more than 150 tradable assets including the most popular commodities available in the markets. CMTrading clients get access to the global oil markets, exceptional trading conditions and robust safety and security under the auspices of the Financial Sector Conduct Authority (FSCA) in South Africa.     

Being a retail brokerage that specializes in CFDs (Contracts for Difference), CMTrading provides clients with unique advantages such as 100:1 leverage on gold, which allows traders with smaller accounts to gain exposure to much larger positions. This translates to substantially higher profit potential, however, it should be noted that leverage also increases your exposure to downside risk.      

On the other hand, while leverage typically adds a certain degree of risk to any investment, CMTrading also offers negative balance protection, thereby guaranteeing that potential losses will never exceed your invested capital.      

If you are interested in learning more about how you can take advantage of price movements in the best-performing commodities or seek to gain from fluctuations in the exchange rate of currency pairs, you will find that CMTrading’s unique offering of innovative services and diverse account types are suitable for both beginner and experienced traders.     

Start trading the financial markets today with an award-winning broker. Join CMTrading, the largest and best-performing broker in South Africa.       

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