Trading gold forex (XAU/USD) has become more popular as forex, silver traders or metal traders look for positions that have the potential to go against inflation or market volatility. Gold trading online can be used by traders as a hedge against other open positions as it can potentially be less volatile than other currencies. Forex brokers such as IronFX offer online metal trading and gold forex pairs such as the XAU/USD, allowing traders to use gold in their trading strategy. Gold has a fixed global volume and it cannot be increased as opposed to the way a government will print more paper money.
If you want to take advantage of online metal trading or precious metals trading or opportunities with gold, here are 7 trading tips to have in mind.
- New York and London trading hours. Generally, gold is a fairly liquid asset. However, it often has the greatest price fluctuation at the beginning of the London session (07:00 GMT), and even greater volatility when the New York session begins at 12:00 GMT. Due to the high volume, liquidity, and volatility during the overlap of the London and New York markets (12:00–16:00 GMT), this is a particularly attractive time window for day trading gold forex.
- Targeting previous highs and lows. A low-risk strategy is to target previous highs and lows as the XAU/USD tends to trade in a range. Since it’s a stable asset, it will reach these previous highs/lows over time. However, this can take time and is not ideal for day-trading gold forex.
- Using moving average crossovers. Moving averages are indicators used in technical analysis and help sort out short-term fluctuations in order to draw attention to a longer-term trend. A simple moving average (SMA) crossover is a signal to buy or sell the underlying asset, gold. For example, traders will build a trading signal based on moving average crossovers, by taking a long position if the shorter moving average is above the longer moving average and vice versa.
- Geopolitical events. When there is political or economic uncertainty, traders turn to gold as a safe-haven asset. Since gold is strongly correlated to the US dollar, and other stable currencies such as the Japanese yen, opening a position and trading gold forex (XAU/USD) can be a reliable way to protect your assets from forex market volatility.
- Using the symmetrical triangle chart pattern. A triangle chart pattern shows price moving into a tighter range and is a “continuation pattern.” This means that after the pattern is completed, the price will continue in the direction it was moving before the pattern. Now, a symmetrical triangle is a chart formation where both the slope of the price’s highs and the slope of the price’s lows come together to form a point which looks like a triangle. This is a battle between buyers and sellers as neither of them is pushing the price far enough, so we have a clear trend. As the two slopes get closer, a breakout is near, but the direction of the breakout is not clear.
- Demand for Gold. Prices can be affected by the demand for gold, whether this is increased market demand for consumer projects or for use in the medical and tech industries. Another interesting sign is when central banks start buying gold in large amounts. This may indicate that governments expect currency values to fall. When central banks buy gold, this pushes the price of gold higher, at least in the short term, which creates a trading opportunity.
- Gold-interest rate correlation. Gold prices tend to rise when interest rates fall, and prices fall as interest rates rise. Historically, gold prices have risen when the real interest rate has fallen below 1%. By watching this interest rate as it changes over time, you can detect trading gold forex opportunities.
If a real interest rate is above 2%, then the value of gold falls. Many experts will suggest selling on XAU/USD if the real interest rate reaches this level.
Although the price of gold is influenced by different factors than those of forex, many rules that apply to forex also apply to gold. Traders who want to try trading gold forex CFDs should consider XAU/USD as a good start. By analysing the price movements of gold, they can start developing a trading strategy to explore trading opportunities.
If you are starting out in CFDs, forex trading or trading gold forex, then registering with a reliable broker with a wide range of educational resources is a great way to explore trading opportunities. Recognised and leading brokers usually provide in-house and independent research and analysis, which you can use to develop your own strategy and expand your knowledge. IronFX has a longstanding tradition of excellence in online trading and can offer new traders the support they need to start trading gold forex and other financial assets.
Benefits of trading gold forex (XAU/USD) with IronFX
- MT4 trading platform
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- Free Deposits and withdrawals*
- Advanced educational material
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- Exclusive research and analysis by in-house experts
- 24/5 multilingual customer support
- Tailored educational insights for beginners and professionals