5 Winning Strategies to Apply When Trading Gold

Gold prices have been on a rollercoaster ride for the better part of 2022. They rallied from $1778.22 in January to a high of $2056.07 in March. However, gold has been sliding since April, and hit a low of $1682 on July 21st.

With such volatility, it is only natural to wonder, how do you go about trading gold? If you are in such a dilemma, here are five strategies you can apply to increase your odds of success trading gold.

1. Trade the fundamentals

Gold is widely used as a hedge against market risks. As such, it tends to trade opposite to the stock markets. As a fundamental’s trader, you can aim to understand whether investors perceive the equity markets as high risk or expect the economy to do well.

When investors expect the markets to do well, gold tends to drop because money flows more into stocks and other risky assets. The reverse also holds.

To understand how this relationship works, consider that the risks were at their highest between January and March. That’s because of the War in Ukraine and rising inflation as years of quantitative easing caught up with Central Banks. Gold surged in this period because investors were moving away from risky assets.

However, between March and July, the markets have priced in the inflation fears and the Ukraine war. This has led to a jump back to equities and away from gold. This has also been reflected in the price of gold in the said period.

As a trader, understanding these broader market factors can increase your odds of success when trading gold.