Given the global events related to the pandemic, the great wave of risk aversion has heightened the appeal of safe-haven assets like the Japanese yen, and gold, the ultimate haven asset. While the coronavirus’s spread drives up the price of gold, the longer-term technical outlook for the yellow metal is also increasingly positive. The smallest contract you can have is based on one ounce, and the current price of gold reaches 1,934.91 USD per ounce. Keep reading to learn more about the forex XAUUSD strategy.
Best tips for trading XAUUSD, best indicators to trade the gold
Regarding tips for trading XAU/USD, we give you bellow several crucial things to pay attention to:
- Market sentiment – every beginner should firstly consider the market sentiment, which can be positive or negative. If sentiment is positive, the price of gold will fall and vice versa. It’s the basic strategy to start with.
- Dollar price – Since gold is linked to dollar price, you need to follow what is happening to the dollar and its performance compared to other currencies, especially Euro.
- Demand for gold jewellery – Watch out for demand for gold jewellery in China and India in particular, where gold is perceived as a long term investment with its implementation in many industries.
- Gold supplies – The gold supply position is also another indicator. So keep a keen eye on leading mining companies producing gold such as Barick Corporation or Newmont Mining.
All forex trading rules are generally applied to trading gold. Retailers must pay attention to not over-leverage, manage carefully capital risks, set targets, and stop if something starts going wrong.
How many pips does gold move in a day
In the Forex market, pips stand for “point in percentage,” and minimal variation in the price of a specific currency pair is called Pip. In most price quotes, the Pip is represented by the fourth number following a decimal.
The gold market can make pip moves in a blink of an eye. It depends on many factors and changes on a daily basis. Generally, we can see 300-800 pip moves of gold on a daily level. Due to its extreme volatility, gold can sometimes swing from 60-300 pips per minute. It’s not uncommon to see gold move to 3000 pips per day.
When is the best time to trade gold in Forex?
When wishing to take a position in the gold market, the most delicate question one quickly faces is when is the best time to buy gold.
All you need to do is take a close look at the monthly gold charts. Find the moment when the average is the lowest. Once the price of gold approaches this value again, this will be the perfect time to take a long position.
This rapid analysis allows you to take a position at the best price to resell a few times later at a higher price and thus achieve significant profits. So you don’t have to wait for an uptrend to take a position in gold.
Forex XAUUSD strategy – How to trade gold
At an earlier time, trading gold was not so easy since it came only in physical form. Today we have online trading associated with many kinds of contracts such as options and futures contracts. These financial instruments spare you from the obligation to keep your gold in a safe full of billions.
To profit from gold price fluctuation, you can also perform a trade live on the Forex, or you can diversify your portfolio in the equity market with the help of a regulated broker company.
Whether it’s trading commodities through futures contracts or Forex currency pairs, the spread has the same function and importance. The difference between the buying price of gold at a given time and its selling price at the same time is commonly called a “spread”. For the trader, these are fees charged directly by the broker used on the transaction carried out.
To better understand, let’s take a concrete example:
When you go to your online trading platform, you can see two values associated with the CFD on gold like:
Gold: Buy 1800.50 / Sell 1800
Therefore, we calculate the spread by the difference between the purchase price and the sale price, and we obtain a cost of 50 pips per unit. If you bought an ounce of gold and resold it at the same time, you would lose 50 pips on the trade. You must take this spread into account during our tradings.
Forex XAUUSD strategy – XAUUSD scalping strategy
One of the most straightforward strategies for trading gold on Forex is the XAUUSD scalping strategy. It comprises identifying buy or sell opportunities taking into account previous highs and lows for the XAU/USD trading pair. You can open a position while trending up and also select a last high as the selling price, or vice versa.
XAU/USD scalping concept of trading is based on the current direction reflected by RSI(relative strength index). RSI is a filter indicator helping you to determine when is the best moment to take a trade when to enter a buy or sell order or to set the stop loss or take a profit, all according to market momentum indicated by this filter.
Best time to trade gold futures
Gold futures contracts agree to a fixed price for the commodity at a specific time frame in the future. If you trade on Forex, there is more room for leverage than dealing with physical gold. Returns depend on the price fluctuation between signing the contract and the expiry.
Anyway, the best time to trade gold futures is whenever you feel like it. Just open up charts and look at the volume of volatility to check when most of the market activity is going on.
We hope we helped you with these gold trading tips. Today, there is not much difference in the trading strategy for gold and foreign currencies. If you want to trade gold on Forex, you should first be aware of things such as demand, supply, market sentiment. After having analyzed the market, choose wisely your forex trading platform and, finally, the best momentum to enter the trade.