How is gold on the stock exchange

Trade gold on the stock exchange

Why are many investors interested in buying gold?

If you, as an investor, are very interested in the commodities market, especially precious metals, then you may already have your eye on gold for one of the following reasons. The greatest attraction of trading gold is that it has a very high volatility compared to other stock market stocks. This means that the gold price very often shows large swings and therefore enables short-term strategies. However, there is also a high risk associated with this.

Since gold has long been considered a safe haven, institutions such as banks prefer this asset for their investments, especially in times of high inflation, as gold is not very sensitive to inflationary influences and the value tends to remain stable while currencies lose value.

Finally, it should be noted that gold is an asset that is very responsive to supply and demand. Given the fact that gold production is currently reaching its limits, while demand may continue to rise, it is possible to trade this value for the longer term. The increasing demand comes mainly from industry, especially from China, which is expanding very rapidly.

Undoubtedly, you know that gold is still typically viewed as a safe haven asset when it comes to investing. This means that the price tends to stay stable or even increase when other financial markets are in trouble. This was the case, for example, at the beginning of the economic crisis in 2008, when the price of an ounce of gold shot up, or more recently during the coronavirus crisis.

Therefore, gold lends itself to both long-term and short-term strategies. However, it is always true that, especially with investment intentions that are invested over a period of several years, it is advisable to buy gold when the price is relatively low, so that it can be assumed that it will rise again in points.

If you want to trade gold for the long term, you often do so by buying physical gold. You can do this either online, at a bank, or at a reseller, always taking into account the storage fees. In addition, it is possible to draw a long-term position on gold with CFDs, but in this case you should avoid leverage if possible.


This is how trading gold on the stock exchange works

There are several ways to invest in gold in the stock market. One of them is a gold account with a bank, with which you can buy a certain amount of gold and then sell it again later. You can also buy and store physical gold with the same goal. However, both options have the disadvantage that the costs tend to be high and the profitability tends to be low.

Trading gold with CFDs is also an option that is becoming increasingly popular. The investment is made here with an online broker by speculating on a rising or falling price of gold with the help of so-called "contracts for difference". In this case, you don't have physical gold.

Nowadays there are more and more online trading platforms - also called brokers or online brokers - that offer gold as a tradable asset. On these platforms, both private and professional investors have the opportunity to access various assets - e. B. foreign exchange, stock market values ​​and even the particularly valued commodities - to speculate.

If you register on one of these platforms, you can make a deposit and use this capital to bet on a rise or fall in the price of gold, depending on the strategy and your analyzes that you have previously carried out. However, these platforms are not suitable for newcomers to trading, as they require a certain knowledge of the stock market.

The functioning of a trading platform for gold is relatively easy to understand. After you've made your first deposit, you can speculate directly on the stock market using CFDs - Contracts for Difference. If you think the gold price will go up, you can put the amount you want on a long position and sell that position again when the price is up enough.

Conversely, if you think the price will go down, write a short position and sell your investment as soon as the price is down enough.

In order for a real return to come out, the exchange rate differences should be correspondingly high. Above all, your strategy must not be based on chance, but should be preceded by an exact and comprehensive analysis of the price of this asset.


How do you make a fundamental analysis of the price of gold?

As mentioned above, fundamental analysis is one of the two essential analyzes for trading gold in order to understand the prevailing trend and to be able to estimate the future trend. The second analysis is technical analysis.

Fundamental analysis primarily examines the various external factors that are related to the gold market and consequently influence the price of the commodity. The following are some examples of such factors that you should consider in a fundamental analysis before buying gold on the stock market:

  • There is an inverse correlation between the dollar and gold. This means that when the dollar increases, the gold price tends to decrease, as it then becomes more expensive for investors to buy gold in a different currency. Conversely, gold tends to rise when the dollar falls. Like all other indicators, however, this indicator is not valid on its own.
  • The current economic situation should also be followed closely, as it has been noticed for some time that the crisis in Europe has had a negative impact on the gold price. Conversely, investors tend to buy gold again when good news about the European market becomes known.
  • After all, global economic growth also has a positive influence on the gold price, because the better the industry runs, the more resources such as precious metals it consumes. In this context, one should pay particular attention to the demand from emerging countries (e.g. the Asian countries). China in particular has a high demand for gold.

However, the points on this list are not the only ones that should be included in your analysis before buying gold on the exchange. Depending on current events and the state of the world economy, there are other fundamental indicators that can be helpful for such an analysis. In general, one should follow and evaluate all current news about this market. For this it makes sense to first look at which events in the past have influenced the price of the ounce of gold.

Remember, however, that fundamental analysis is not the only analysis you need to know if you are to anticipate the future development of the gold price. In parallel, you should systematically conduct a technical analysis, which, as you will read below, is based on the price movements of this asset on the charts.


How to do a technical analysis for the price of gold?

As we mentioned earlier, gold is an asset with very high volatility. This means that the price action can be rapid and spike high. Technical analysis is therefore essential before writing a position on the price of gold or buying physical gold. This analysis helps you to interpret the historical stock market charts of gold and to recognize signals for a rising or falling price. In addition, you can use them to estimate whether a particular trend is likely to continue or reverse and what the volatility of the market is over a certain period or at a certain point in time.

The stock market charts offered by online brokers can usually be personalized. With their help one can carry out a comprehensive technical analysis. You can display several technical indicators without having to calculate them yourself, and then interpret them based on your level of knowledge.

The most popular indicators among gold traders include the MACD, moving averages, Bollinger bands, and pivot points and levels of support and resistance.


How do you choose an intermediary to buy gold online?

You now know that you can buy gold online by contacting a broker or broker on the internet. Now all you have to do is decide which platform you want to use. This decision should not be taken lightly, it should be carefully considered. Ideally, you should compare different points such as:

  • the question of whether the intermediary is an approved broker
  • the tools he makes available (analysis, newsfeed ...)
  • the deposit and withdrawal conditions
  • the quality and ease of use of the platform

If you trade commodities like the gold ounce on an online trading platform, there are transaction costs that the broker calculates in the form of spreads. So what are these spreads exactly? How exactly do they arise in a transaction with CFDs? Here are some pointers to help you see and understand more clearly what the real cost of the degrees is.

Whether you are trading a commodity such as gold or currency pairs on Forex with CFDs, the principle of the spread is always the same. Spread is commonly the difference between the purchase price of gold and its sale price at a specific point in time. In principle, it is about the fees that the broker charges the trader for the executed transaction.

Let's take a specific example for a better understanding. For example, on an online trading platform for trading gold with CFDs, you see two values:

Gold: purchase 1,800.50 - sale 1,800.00

The spread is the difference between the buying price and the selling price. In this case, the fee is 50 pips per unit. This means that if you buy and sell an ounce of gold at the same time in the transaction, you would lose 50 pips. This spread must therefore be taken into account accordingly.

In plain language, this means that the spread for CFDs includes all fees associated with trading gold online.

It should be noted that the fees on other platforms, on which you can buy physical gold, for example, are calculated differently and are therefore not stated in the same way. In this respect, you should always compare the different options that are available to you and then decide on the one that suits you best.


Who is online gold trading for?

Below you will find some clarifications about the different types of investors who are interested in trading gold online. It is important to understand that trading gold using CFDs or any other trading instrument is not suitable for beginners. In order to begin such an activity, it is necessary to have a good prior knowledge and a good understanding of how the gold market works.

Like all financial transactions, speculating on gold is fraught with risk. You have to be aware of this and, above all, create a well-considered trading strategy. Otherwise you could make wrong decisions that could lead to a loss of part or, in the worst case, all of the capital.

Brokers who can trade gold with CFDs also offer leverage. However, this instrument carries a high level of risk. With such a lever you can increase the invested capital and thus potentially realize higher profits, but the risk increases to the same extent.


When is the right time to buy gold?

If you want to position yourself in the gold market, the most delicate question is when it comes to the most favorable time to buy gold.

For this you should inevitably watch the monthly charts with the gold prices carefully. For example, some traders use the lowest average and wait for gold to approach this level in the hope that this will herald a rising trend. You can use the charts to implement two different strategies for buying gold. Either you wait until the price is at a very low level and buy at a cheap price, or you wait until a definite upward trend actually sets in. The decision depends in large part on your trading intentions.

As we mentioned above, the general economic climate has a very strong impact on the gold price. If you look at the prices of the past, you can see that the price of the yellow metal rises the more the situation in the world economy worsens, especially if other factors are added.

This phenomenon can be traced back to the fact that private and institutional investors want to protect their assets and investments if other markets threaten to collapse. In this context, other - mostly psychological - signs can point to an impending rise in the gold price.

So it can be said that one must pay particular attention to financial and economic news in order to have an idea of ​​what the future of gold may be. The more negative this news is, the more fearful investors are and the more they are pulling out of certain markets. The same investors then sometimes reinvest their money in a safer market: the gold market.

However, there is another external factor to look out for when looking to buy gold. This is the dollar. Since gold is valued and bought in dollars, one should pay attention to the EUR / USD exchange rate in order to benefit from a favorable exchange rate for the purchase of gold. A falling dollar against other currencies often leads to massive investments that lead to an appreciation of the gold rate.