When the stock market is doing well, when companies keep seeing their price per share soaring upward, gold doesn’t often get spoken of. However, this is sometimes one of the best times to start looking at gold because of the relationship that it has with the U.S. economy. During normal market times, the U.S. dollar and gold have an inverse relationship; when one goes up, the other goes down, and vice versa. As you could probably guess, when the dollar is strong, people take their money out of gold and convert it to dollars. When the dollar begins to sink, the price of gold goes up because dollars are then converted back to gold.
How to Trade Gold in Binary Options?
Gold is a commodity and it has universal appeal. At one point, the U.S. dollar was even linked to the price of gold. This, however, changed in the 1970s when President Nixon took the country off of the gold standard and introduced a floating currency. Still, each has value because of the fact that people trust in them. This is the root of value within every single asset, commodity, currency, or anything else, and it is why prices go up and down with regularity. Usually, the price centers around what an asset is actually worth, and this is why you see oscillation within stocks that are headed upward. Apple is a good example of this as their price keeps going up and up, there will be small declines in the process.
Back to the price of gold, if you look at the futures chans for what people are willing to pay for gold that they purchase 5 years from now, the price is expected to rise by more than $100 per ounce. Gold’s price has risen steadily over the years, but the price of the dollar has, too. This creates a weird situation where there is a long term positive correlation, but the fastest growth occurs in a short term negative correlation. So, if you think that the dollar will go up in price and are hesitant to purchase gold because of this, there’s not much to worry about if this is a long term investment. Traders, on the other hand, need to keep a different mindset.
Trading gold short term can be tough, but,as mentioned before, the short term correlation to the U.S. dollar is negative. This can be a guiding principle as you begin. However, many people find that gold grows or shrinks so slowly in price that these short term fluctuations are not worth speculating on. This is true if you are purchasing futures contracts, but not if you are trading in the binary options market. Binaries have a low entry cost, and you can make profitable trades with as little as $10 to $25 at a time, rather than the tens of thousands of dollars you would need to produce the same in the commodity exchanges.
Formulating a strategy is easy, especially if you have Forex experience. Using a real time piece of software, such as MetaTrader 4, to watch the price of the dollar across a few different currencies is a good start. When you can see that all of them are in agreement of the price of the dollar, a short term trade on a gold binary option should be helpful. Depending on the length of your trade, you should be able to anticipate how the technical indicators look on the dollar, and then take action. Observation and experience will help you to refine this skill until you become more adept at choosing the right expiry.
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