When you decide to trade on the markets using an online trading platform it is essential to be able to complete rapid technical analyses that enable you to better anticipate the actual and forthcoming trends. But to do so it is best to follow the price in real time and not using historical charts. Here therefore is some advice to complete an analysis on the gold price in real time taking into account technical and fundamental data that have a direct influence on the movements of this type of asset.
What determines the price of gold?
The price of gold, calculated in dollars per ounce, is one of the most versatile in that it varies strongly over the short or the long term. These variations are due to different factors that influence its value, either rising or falling.
Of course, it is above all the difference between supply and demand of gold on a worldwide level that determines the real value per ounce of gold at any precise moment. But the demand is also influenced by a number of factors.
It is therefore essential to take into account different factors to complete a comprehensive analysis of the price of gold such as the following:
- The technical data using the major chart indicators that enable you to determine the strength and direction of a trend as well as anticipate the strengthening or reversal of a trend.
- The fundamental data with an analysis of the different factors susceptible to influence the gold price either one way or another.
A pertinent analysis of the gold price in real time:
To complete a pertinent analysis of the gold price in real time it is necessary that you choose a chart that is updated regularly in real time. Another point, you will need to choose the right time to complete this analysis. In fact the gold market is highly active at certain times more than others, such as the weekend when it is less volatile.
It is also important not to ignore the type of chart you should use. If you are trading gold over the short term then you will probably favour 5 minutes charts using Japanese candlesticks which are more precise for micro-movements. If, on the contrary, you wish to trade over the medium or long term then it would be preferable to use historical charts per hour or even per day.
Among the most reliable indicators concerning the real time analysis of the gold price we recommend the following:
- The mobile averages
- The support and resistance techniques
- The pivot points
Fundamental analysis of gold in real time:
Also, don’t forget that a fundamental analysis is as important as a technical analysis. Therefore, and supplementary to the real time charts, it is recommended that you subscribe to a good economic calendar that will indicate all the significant economical events of each day.
To find more information about the factors that could influence the gold price we recommend you carefully choose your CFD trading platform. In fact, the brokers that offer this type of gold contract often provide daily updates on this market. You will find explanations in real time on the current and ongoing events related to gold or upcoming events that could influence movements in the price of this precious yellow metal. You could also subscribe to a news feed on this subject.
How to identify the trend in the gold price?
To speculate effectively on the price of gold it is essential to know how to identify a trend in order to recognise the right time to sell, buy or keep your positions. To assist you we now offer you the opportunity to learn here in detail how to identify the trend in the gold price as well as the different trends that you may observe using the charts offered freely online by the brokers.
The different trends of the gold price and their charts presentation:
As for any asset, we can identify three major types of trend on the gold price, a rising trend, a falling trend and a flat or horizontal trend.
- A rising trend is characterised by a rising curve that can be steep or shallow depending on its strength.
- A falling trend is, to the contrary, characterised by a falling curve that, again, can vary in its strength.
- Finally, a flat or horizontal trend is represented by a flat line or one marked by a few micro movements that however confer a certain neutrality.
It is of course preferable to take position on buying gold at the beginning of a rising trend or sell at the beginning of a falling trend. We recommend you do not take a position when the gold price is flat.
How to anticipate a trend on the gold price?
As we have just explained, the best time for taking position on the sale or purchase on the gold price is just at the beginning of a rising or falling trend. But to do so you will need to be able to recognise and anticipate the beginning of a trend. To do so, there are different methods.
The first method, which is also clearly the simplest, consists of waiting for the true beginning of a trend to take position. This however depends on being certain of the strength of the trend. The beginning of a rising or falling tend that is going in the same direction as a significant economic event has a strong probability of continuing and even growing in strength. A trend can also be strong when the preceding trend has achieved a critical threshold before making a significant reversal.
This brings us to the second method for anticipating a trend in the price of gold. This consists of using the psychological thresholds represented by the pivot points or the support and resistance levels.
- A pivot point is a price level that is susceptible to lead to a major change in a trend, either rising or falling.
- The support level is the critical low level of a downwards trend. Breaking through this level leads to an acceleration downwards and holding at this level signifies a reversal upwards.
- The resistance level is the critical high level where breaking through this leads to a rising uptrend and staying below signifies a reversal downswing.
Historical movements in the gold price on the stock markets:
Since 1971 the price of gold has been determined by the difference between supply and demand, in the same way as with other stock market assets. It has therefore experienced strong fluctuations with an initial record rise in 1980 to 850 dollars per ounce. Compared to the price nowadays and relating to the American price index at that time we can consider this price as a historical record for gold as the equivalent nowadays to this price would be 2,477 dollars per ounce.
From that point, in February 1980, the gold price experienced a significant downwards correction that brought it to between 300 dollars and 500 dollars between 1982 and 2006.
It was in fact in 2006 that we observed a new rise in the price of gold on the cash market and the stock markets in general with the ounce attaining 1011.25 dollars in 2008. Unfortunately the commodities market was struck in full flow by the fallout of the economic crisis. At the end of 2008 the price per ounce of gold had dropped to 690 dollars. It wasn’t until the economic recovery in 2009 that the price of gold again climbed to a record peak, this time over 1,500 dollars per ounce in spring and it continued climbing to reach 1,908 dollars in August 2011 despite an unstable situation which was generally more of a downslide for other financial markets.
Unfortunately for investors, this spectacular rise in the price of gold was balanced by a new downwards correction. This was particularly motivated by containment measures implemented by the United States and rumours of a massive gold sell off by central banks. This downwards correction continued for several years and was finally stabilised only fairly recently. Analysts remain very optimistic for the coming years concerning the price of gold that should rapidly recover many points.
How does the gold price move according to influential factors?
To be able to correctly analyse the price of gold and thereby to trade in it effectively online you will need to understand how this asset reacts according to different factors that may influence its price.
The first information you should analyse to do this is of course that of supply and demand and the difference between them. We know that the production of gold is fairly stable over time. But demand however changes constantly and essentially depends on the needs of the jewellery sector as well as electronics, the medical industry and large financial institutions such as central banks and of course the investors that speculate on this commodity. In this way we also realise the many uses of gold in international industry. It is however the jewellery sector that generates the most demands for gold each year and in fact accounts for nearly 80% of the gold demand.
Gold is also an asset that we know to be particularly volatile as it is capable of displaying major price differences over short time periods. For example, in the beginning of the year 2000 and up to 2011 we can observe significant upswings in the price of this precious yellow metal which rose from $250 to over $1,900. But rapidly the price experienced a new and significant drop before stabilising between $1,200 and $1,300 per ounce. There are several explanations for this volatility and the ability of gold to display these significant variations in price and strong marked trends.
By completing a historical fundamental analysis on the gold price we can observe in fact that different factors influence it in the direction that this asset takes. Firstly, we know that gold is considered as a refuge value and particularly as an alternative to physical money thereby enabling protection against the phenomenon of inflation. We can also observe that during periods of high inflation the gold price tends to rise as the investors tend to turn towards this commodity instead of the currencies. The periods of economic tension and crisis also promote an increase in the price of gold which once again plays its role as a refuge value. Generally speaking when the financial markets show signs of anxiety due to a complex economic situation the investors are drawn by gold as a trading asset.
Finally, it can be beneficial to compare movements in the price of gold to those of interest rates. The price of gold in fact mainly opposes the prices and rates of other stock market assets such as shares and bonds that are generally appreciated by investors for their relative security. But when paybacks in the form of dividends are less gold becomes a more attractive asset, and the opposite is also true when paybacks are higher.
It is also important to note that there is a correlation phenomenon between the gold price and that of other metals on the stock markets. In fact, by comparing the price of gold to that of silver in particular we can easily evaluate its relative value and know if the price is too high or, on the contrary, too low. We know that the price of gold and that of silver tend to move in the same direction. Therefore a strong difference between them is the sign of an under-evaluation or an over-evaluation of one of these prices. The more experienced traders use this difference to implement their analyses and strategies.
Making predictions on the gold price
Gold, as with any commodity on the stock markets and, more generally as with all financial assets, cannot be profitable unless we are capable of making reliable predictions regarding its price, this means anticipating any future variations of the price over the short, medium or long term according to the planned investment strategy. To assist you in becoming a profitable gold trader using CFDs we offer you the opportunity here to learn how to proceed to make correct predictions on the gold price without needing to be a financial expert.
The most reliable method to make forecasts on the gold price:
The best method to succeed in creating precise forecasts on the gold price consists of simultaneously using the two major types of analyses, the technical and fundamental analyses.
A technical analysis is in fact ideal if you are trading over the short or medium term and enables you to determine the strength of an ongoing trend and any possible reversals or acceleration of the trend. A number of indicators are at your disposal on the brokers’ charts as we will examine later.
A fundamental analysis is also extremely important for your gold strategy as the price of this commodity is particularly sensitive to political and economical events.
A technical analysis for making predictions on the gold price:
A technical analysis is the most common method to predict movements in the gold price. This takes into account the different factors such as volatility, opening and closing prices as well as other indicators such as the mobile average, pivot points, support and resistance levels and much more.
To use these indicators you simply need to use a customisable chart that you can find on any reputable trading platform. Using this you can display these indicators and obtain trading signals that are reliable over the short or long term. There is no need for you to know how to complete these complex calculations as the software will do this for you.
What are the most probable scenarios over the medium term for movements in the gold price?
If you plan to buy gold or speculate on its price using a medium or long term strategy then you are surely wondering about the most probable upcoming scenarios according to the analysts of this asset.
Concerning the historical charts on the gold price the scenario that appeared to be the most probable at the beginning of 2018 was that of a downwards trend. At that time it had already begun and was expected to last for several months or even years. The situation of the gold market at that time highly resembled that of the 90’s which led to a clear downwards trend. Of course this forecast was also dependant on certain other factors such as changes in the worldwide economic situation.
Another possible scenario for the years ahead is that of a neutral trend in the gold price. It is in fact entirely possible that the gold price passes beyond $1,280 to stabilise under $1,375 for a time. This point represents a type of point of equilibrium that is particularly important for investors.
Finally, an upwards scenario of the gold price remains possible although not highly probable regarding the current situation of the stock markets. The implementation of such a rising trend would particularly depend on the ability of this asset to slide above the $1,375 bar which is the current technical resistance and to remain above it for several weeks. We could then envisage a continuation of a rising movement towards a new resistance level at $1,550.
While waiting to obtain more information and rising or falling signals on the gold price over the long or medium term we recommend you take advantage of the significant volatility over the short term and the frequent micro-movements of the gold price to implement a day trading strategy. This could notably serve as a cover for your longer term positions and limit the risks of losses in the case of a situation that is different from that you had foreseen. To do this CFDs are undoubtedly an ideal instrument that offer great flexibility and an unequalled rapidity in the execution of your orders.
How can you invest in the gold price on the stock markets?
As we have just noted gold is a choice asset for investors that wish to profit from its volatility to place their money. In reality there are different ways to speculate on movements in the price of gold.
You could notably choose to speculate on physical gold in the form of gold coins or gold ingots. This physical gold can be purchased by anyone. You will however need to stock it either yourself or through a specialist service provider who will charge you for this service. Of course this service generates supplementary costs that should be taken into account to determine the profitability of your placement. If you choose to store the gold yourself there is the question of security of your coins or ingots which should be carefully thought on beforehand.
It is also possible to invest in gold through what is called ‘paper gold’. These are mainly ETFs or other derived financial products. The ETFs here are trackers on the index funds on the stock markets. They are traded in the same way as shares on the stock markets and function by replicating the performance of a reference index. This index can be a gold index or more generally an index on the commodities overall. These derived products are highly affordable investment tools for individual traders. Among the most popular we find the CFDs or Contracts for the Difference, which offer the possibility of taking buying or selling positions on the price of gold. Here you can speculate directly in real time on the stock markets by opening and closing positions in order to profit from differences in the price registered on this asset price. These CFDs are accessible through the online trading platforms available to investors through the online brokers.
In any case, CFDs are still considered by many to be the best direct trading method for gold in real time as they enable you to fully benefit from each movement and to implement a long term or short term strategy.