Among people who have a distant view of Forex, there is an opinion that the currency market Forex involves only the trading of currencies. However, this opinion is wrong. Trading gold can be called an alternative trade on the forex market. Gold is probably one of the long-living instruments, which has been traded on the markets for ages.
This metal after a long time has not lost its high value, which makes it so popular for trading on the foreign exchange market, as well as operations with currencies of different countries. Speculators who are not in the first year of trading on the Forex market, prefer to trade gold.
First of all, such a choice is connected with the absence of marked price fluctuations, as well as with its profitable sale. As you know, the main market for gold trading is one of the world’s largest exchanges, New York or London. Whereas, you can trade gold on the currency market, Forex, all over the world.
First of all, an important advantage of trading gold on Gold Trading Platforms that allowed trade in South Africa is the round-the-clock operation of the market. However, a trader should remember that gold quotes are fixed several times a day: at 10:30 and 15:00, according to the London time scale. Hence, the most optimal time for successful trading of gold on the forex market is between 10:30 and 15:00.
One should not forget about the correlation between gold and the U.S. dollar. Among the experienced traders, this is one of the moments, which play a big role while making deals. Thus, if gold is bullish, i.e. longs prevail on the market, the American dollar is bearish, i.e. short positions are preferable.
Also, the trader should always be aware of news because gold price fluctuations depending on the current fundamental factors. If there is an economic crisis in developed countries, gold prices begin to grow rapidly. The reason for this is that investors begin to withdraw their funds from the crisis economy and invest them in more stable metals.
Also, the price of gold is influenced by oil prices, in addition to the U.S. dollar. An increase in the price of oil is an indicator of the growth of the price of gold.
The private trader has no direct access to international financial markets. There is neither sufficient capital nor technical capability – he needs an intermediary. This can be a bank or a management investment company with a mutual fund. Active trading requires a broker – a company with access to stock exchanges, liquidity providers, or ECN systems.
Almost all brokers can be called universal. If it is a stockbroker, he offers services of futures trading, options trading, stock trading, and derivatives, including gold assets.
Since brokers are almost universal, the choice comes down to the classic rules:
- Spread type and level. Account type.
- Speed of order execution.
- Leverage. The bigger it is, the better. But provided that it is used within the rules of risk management.
- Availability of passive trading services. For example, copying trades.
- No additional commissions. Almost every broker has a fixed commission for each lot on an ECN account. Other commissions, including for the withdrawal of money, should not be.
- Transparency of the offer, regulating trading documents, trading conditions, license availability, professionalism of the support service, etc.
First of all, it should be comfortable to work with a broker. Therefore, it is worth risking a minimum deposit or starting with a demo account.
Despite all the advantages, trading gold can also have disadvantages. Perhaps the most significant disadvantage of trading gold on the Forex market is a fairly high spread. Besides, the leverage in gold trading is much lower than in currency trading.
Based on all of the above, we can conclude that trading in gold is an excellent alternative to trading in the foreign exchange market.