Gold trading is an extremely interesting niche of the foreign exchange market. Examining the relationships between precious commodities like gold, global currencies and trader psychology can reveal all kinds of unexpected patterns. With modern technology meaning you can open an account with a Forex broker and start gold trading in a matter of hours, there’s never been a better time to get involved.
Recent months have seen the value of gold climb to all time highs. Why? Because the last few years of global recession, uncertainty over oil reserves, emerging economies and expensive wars mean that old linchpins like the US Dollar, the Euro and the Yen no longer seem so certain.
When things seem uncertain, traders always buy up gold. Gold belongs to no nation in particular and thus avoids the slings and arrows of outrageous fortune. Gold trading is recession proof, war proof and doesn’t go out of fashion. The value of gold may rise or fall from day to day but it always retains some kind of value and tends to return to a decent value whatever happens.
The key to gold trading is to look for signs that a traditionally strong currency is about to fall in value. This requires an in depth understanding of global economics and politics. Of course every other trader is trying to do the same thing; when a gold rush begins the game becomes guessing when the climb will stop.
Spot trading gold is another interesting way to play the game. Gold has unique qualities that make it distinct from other commodities. The value of gold is often affected by what happens in gold producing countries. For example if war in a gold producing nation threatens to lower output then you can expect the price of gold to rise. Another interesting phenomenon is that in peace time the value of currencies of gold producing countries will often rise with the price of gold.