For those looking to expand their portfolio or invest for the first time, gold is often viewed as a safe haven, especially during periods of uncertainty. When markets are in flux and change is endemic, it’s a commodity that almost always experiences a resurgence in popularity, and 2020 seems like a prime time for it to once more come into its element.
That’s because the world around us is changing at a rapid rate. With technical progression moving at a faster pace than ever before, the looming specter of Brexit, and ongoing tensions between China and the US, even the most experienced investors are finding it hard to predict what will happen next.
Enter gold. An ideal addition to portfolios in 2020, it takes an intelligent and experienced hand and a strong strategy to nurture its potential. Here are four key tactics to make it work for you.
Familiarize yourself with external drivers
Before stepping into the world of commodities trading and specifically the trading of gold, it’s important to understand the numerous factors that drive its value and how these are impacting prices in the current environment. A simple way to embark on this path is to visit online brokers such as eToro who, as part of their service, provide a live figure for the price you’ll pay if you buy gold at the site. This precious metal has been treasured by humankind since time immemorial, but today, it’s not only demand that determines how much you can expect to pay for it. In fact, there are many other elements at play.
Use fundamental analysis to gain a greater insight into the market
When it comes to analyzing markets, there are two main methods you can use: fundamental analysis and technical analysis. The former works on the principle that you study external events and influences to gain an insight into how the value of an asset will evolve–in this case, gold. This means, for example, that you might want to pay close attention to any and all factors that can drive the price of this precious metal, such as central bank reserves, the value of the US dollar, the worldwide jewelry and industrial demand, or the state of mining in various regions, such as British Columbia. These are discussed in more detail in this helpful article from Investopedia, which provides a handy insight into the factors you’ll need to be aware of in order to understand and assess how the price of gold is likely to move. In doing so, the idea is that you can predict long-term trends and use them to your advantage when it comes to deciding on your trades.
Use technical analysis to identify trends
While there are those who rely solely on fundamental analysis to determine their trading strategy, there are many more who utilize either technical analysis or a combination of the two to identify and correctly respond to emerging trends. In order to do this, it’s important to have a reputable source who can provide you with up-to-date information on market movements, making the right broker essential. Platforms like eToro, for example, are ideal, providing a wealth of high-quality data and the most contemporary figures for you to draw from. Use these to spot trends as they emerge, and you’ll give yourself the best possible chance of capitalizing on market movements.
Stay aware, with moving averages and pivot points
While it’s up to you whether you prefer a strategy based on fundamental analysis, technical analysis, or a combination of the two, what’s important is that you develop a method of trading that works for you. For those that fall into the latter two categories, this will only be the case if you’re able to stay abreast of gold prices and take immediate note of any movement. There are certain instruments designed to help you with this, and two that are particularly noteworthy are ‘moving averages’ and ‘pivot points’. The former is crafted to make sure you’re not alerted every time there is a random short-term price fluctuation, but that you do know when something more significant occurs, while the latter is a price level set by the trader, which is used to alert you to possible market movement so you don’t risk missing anything major.
There is a lot to learn, but with some knowledge and practice, gold trading could prove to be a lucrative endeavor. Is it something you would consider trying in 2020?