How to Trade Gold in the New Year
From March to October 2022, the price of gold fell 22% lower. Since then, gold prices have recorded a 6-month high into the new year.
According to the World Gold Council central banks bought more than 400 tonnes of gold in the third-quarter of 2022.
Learn more about some of the factors influencing the price of gold and how to trade it.
|Market:||Gold vs US Dollar|
|Trade.MT4 / Trade.MT5 Symbol:||GOLD|
|Date of Idea:||3 January 2023|
|Time Line:||1 - 8 weeks|
|Stop Loss Level:||1,720.00|
|Position Size for Trade.MT4 / Trade.MT5 Account:||Max 2%|
- The Trade.MT4 and Trade.MT5 accounts allow you to speculate on the price direction of metals such as gold using CFDs. This means you can trade long and short to potentially profit from rising and falling prices. Learn more about CFDs in this How to Trade CFDs article.
- The Invest.MT5 account allows you to buy real stocks and shares from 15 of the largest stock exchanges in the world. Investors may opt to purchase gold mining stocks or gold ETFs (exchange traded funds) which could benefit from higher gold prices.
All trading is high risk and you can lose more than you risk on a trade. Never invest more than you can afford to lose as some trades will lose and some trades will win. Start small to understand your own risk tolerance levels or practice on a demo account first to build your knowledge before investing.
Why Invest in Gold?
Gold is a market that is often watched closely by financial traders and fund managers around the world. It is the oldest form of currency and has multiple purposes in a trader’s portfolio.
Gold’s Safe Haven Status
Investors tend to flock to gold in times of economic uncertainty as it is often classed as a safe haven. The world’s most famous investor, Warren Buffett, said that “gold is a way of going long on fear.”
After a bearish year in stock markets in 2022, fears of a recession in some of the world’s largest stock markets in 2023 may make gold more attractive to some investors.
Gold as an Inflation Hedge
According to data from the World Gold Council, gold can act as a hedge against inflation over the long term. In 2022, the US stock market entered a bear market due to aggressive interest rate hikes from the Fed to combat inflation.
However, this did help the US dollar to surge higher which caused gold trading against the US dollar to fall last year. This year could be different with inflation still persistently high and central banks cautious about raising rates too much in case of a recession.
Gold as a Long Term Investment
Many stock market investors choose to invest in gold exchange traded funds (ETFs). These funds aim to mirror the underlying performance of gold prices by either purchasing gold futures contracts or by holding physical gold.
With Admirals, you can speculate on the spot price of gold, trade gold futures contracts, gold mining stocks and gold exchange traded funds, or receive the performance of gold from an Admirals Wallet Gold account with zero holding costs.
Gold for Short Term Speculation
As the price can be quite volatile, some traders will use the asset for short term speculation. Products such as CFDs (contracts for difference) allow you to trade long and short and potentially profit from rising and falling gold prices.
Learn more in the 6 Trading Strategies for 2023 article. Combining fundamental analysis and technical analysis can help to increase the probabilities when trading. The direction of the US dollar, the pace of rate hikes from central banks and sentiment around the stock are some of the main themes to keep an eye on this year that can affect the price of gold.
Gold Price Forecast 2023
From a technical analysis perspective, the price of gold has been held in a long-term trading range between ~2,074.00 and ~1,677.00, as shown by the two black horizontal lines on the chart below.
In late 2022, the price tried to break through the bottom of this range but failed to gather any momentum and instead traded back in the range, recording a false breakout pattern. Gold prices have been rising since and we are now closer to the middle of the range.
There is potential for the price of gold to continue its upward movement towards the top of the range at ~2,074.00. However, traders would need to go to a lower timeframe to identify if bullish momentum is still showing. This can be from analysing cycles, moving averages and other technical analysis tools.
If the price does break through the bottom of the range then there could be further downside towards the pandemic lows in 2020 around ~1,450.00.
An Example Trading Idea for Gold CFDs
Based on the analysis above, if the price of gold can continue its false breakout from the bottom of the range and continue higher, an example trading idea for the Gold vs US dollar CFD could be as follows:
- Buy the Gold CFD on a break of the high of the first day of 2023 at 1,860.00
- Place a protective stop loss at the last major swing low from support at 17,20.00
- Place a target towards the top of the trading range at 2,060.00.
- Keep your risk small at a maximum of 2% of your total account.
- Time Line = 1 – 8 weeks.
- If you traded with the lowest position size of 0.01 lots, then:
- If your target is reached = $200.00 profit
- If your stop loss is reached = -$140.00 loss
It’s wise to remember that the price of gold is unlikely to go up in a straight line and it may even go much further down before it rises, especially considering how volatile gold price can be.
Therefore, be sure to exercise good risk management which is one of the most important aspects of trading successfully. You should always know how much you could potentially lose on a trade and the risks involved.
You can do this using the Admirals Trading Calculator for the Trade.MT4 account, as shown below:
Another factor to consider is the cost of trading gold CFDs. These include:
- Spread. This is the difference between the buy price and the sell price of an instrument.
- The Admirals typical spread on gold is only 0.20 USD!
- Commission. This is the cost to make a buy and sell transaction.
- From the Admirals Trade.MT4 and Trade.MT5 account there is zero commission to pay to buy or sell gold CFDs.
- Swaps. This is the overnight rate to roll your position over to the next day.
- The current swap rate for the gold CFDs from the Trade.MT4 account is –23.77 for long positions and 13.907 for short positions.
You can find more details on the Admirals Contract Specification page.
How to Trade Gold CFDs in 4 Steps
You can trade Gold CFDs from the Trade.MT4 or Trade.MT5 accounts using the four-step process outlined below.
- Open an account with Admirals to access the Trader’s Room.
- Click on Trade on one of your live or demo accounts to open the web platform or download the MetaTrader 4 or MetaTrader 5 desktop platform.
- Search for GOLD at the bottom of the Market Watch window and drag the symbol onto the chart.
- Use the one-click trading feature, or right-click and open a trading ticket to input your trade size, stop loss and take profit level.
Click on the banner below to trade gold today. ▼▼▼
Do You See Gold Moving Differently?
Remember that all analytics and trading ideas are based on the personal view and experience of the author. If you believe there is a higher chance the gold price will lower, then you can also trade short from a CFD (Contracts for Difference) trading account which Admirals also provide.
Prefer to Invest in Gold?
If you prefer to invest in gold and want to try and capitalise on the performance of gold prices then you can do so with Admirals too!
The Admirals Wallet Gold Account allows you to receive the performance of gold with zero holding costs.
All you need to do is transfer your investment capital (US dollars, euros, British pounds, etc), to the gold account from the Admirals Trader’s Room and then convert it back whenever you are ready.
INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals’ investment firms operating under the Admirals trademark (hereinafter “Admirals”) Before making any investment decisions please pay close attention to the following:
- This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
- Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
- With a view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for the prevention and management of conflicts of interest.
- The Analysis is prepared by an independent analyst, Jitanchandra Solanki (analyst), (hereinafter “Author”) based on their personal estimations.
- Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
- Any kind of past or modelled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admirals for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
- Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.