Gold Trading Strategies

Of everything to invest in, trade in, buy, hoard or sell, gold is right up there at the top. Why? Because it has a long history of being valuable and even more importantly, it’s sexy. In the past, gold has been used to make peace between warring tribes, as a gift to bribe monarchs, to create religious idols, to fashion jewelry and at times it has even been used as currency. In fact, the US dollar was backed by gold up until 1971. Still today, central banks all around the globe have a store of gold to be used in an emergency. It is a volatile commodity, but those who have the patience to study its moves and learn its trends can uncover the high potential involved in trading gold.

Watching the Relative Strength Index

Gold prices have swung wildly since President Nixon lifted the lid on gold in 1971. Until that time, it had been traded at a fixed rate of $35 per ounce. During the nine years that followed, gold values reached as high as 2,200%. Now that may have been unexpected, but the one that we learned is that where gold is involved, anything can and will happen. But by watching the Relative Strength Index, or the RRI, a trader can pinpoint the prices at which the values top out. This is referred to as the extreme levels, which happen just before the prices stop moving upwards. Just as importantly, there are extreme lows to evaluate. This is what could possibly point to the market hitting a bottom low. Savvy gold traders will watch for these extreme levels to catch the market’s drift and buy and sell profitably.

Gold Trends

One of the most popular ways of catching gold just before reaching its prime is by understanding the trends. Some say that the best way to use trends is by waiting until the trend line is breached and then place your trade. Use short-term charts to watch movement and catch the rising tide. Conversely, you can monitor a trend by paying close attention to its downward sloping. Once you can determine which way the gold market is heading, you can use the trend to your advantage.

Watching the World

When following gold to invest profitably, take a look around at how other markets are faring. The economic strength and the interest rates of other nations must be considered. The most important financial market might be that of the euro and the USD index. Even the price of crude oil can have an affect on the trends that gold will be following. As an example, typically when the value of the USD has fallen, gold comes to the forefront with a strong rally. Watch for the interest rates around the world and pay attention to the strength of each nation’s economy, because they are all closely tied to gold, in one way or another. Nations with strong economies encourages domestic confidence and attract international investors.

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