7.1 Basic Gold Trading Strategies

1. Buy-and-Hold (Long-Term)

• Gold has historically maintained value over time.

• Since 1971, gold gained 10.8% on average against 9 major currencies:

• Requires patience; gold may underperform in some years (e.g., 2021: down 2.4% vs 9 currencies).

2. Position Trading

• Involves taking positions based on expected price trends, often tied to macro factors.

• Example: During high inflation, gold demand rises → long positions may yield profits.

• Gold acts as a safe-haven asset, increasing in demand when USD weakens or inflation surges.

3. News Trading

• Gold prices react to economic, geopolitical, and market news.

• Examples:

  • Central bank gold purchases

  • Jewellery/industrial demand trends

  • Market downturns or recession news

  • Changes in gold production

• Traders monitor news to identify potential trading opportunities.

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7.2 Risk Management

Even as a safe-haven asset, gold carries trading risk. Proper risk management is essential:

1. Stop-Loss Orders: Limit potential losses if the market moves against you.

2. Take-Profit Orders: Lock in gains automatically when a price target is reached.

3. Position Sizing: Risk only 1–5% of your account per trade to survive multiple losses.

4. Leverage Caution: Use leverage sparingly; large losses are amplified with high leverage.

5. Compare Past Trends: “The market never repeats, but often rhymes.” Study historical patterns to assess risk.

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7.3 Technical Tools for Gold Trading

Technical indicators provide insight into price trends, momentum, and potential reversals.

1. Relative Strength Index (RSI)

• Momentum oscillator measuring speed & change of price movements.

• Scale: 0–100

  • <30 → oversold (buying opportunity)

  • 70 → overbought (selling opportunity)

• Can indicate bullish trends (40–90) and bearish trends (10–60).

• Divergence from price charts may signal trend reversal.

2. Moving Averages (MA)

• Smooth out short-term volatility to show trend direction.

• SMA (Simple Moving Average): equal weight for all prices.

• EMA (Exponential Moving Average): more weight on recent prices.

• Single MA: acts as support/resistance (e.g., 50-day MA).

• Paired MA: indicates trend changes

  • Short MA crosses above long MA → bullish

  • Short MA crosses below long MA → bearish

• Triple EMA (3EMA): 20-day, 50-day, 200-day EMAs → confirm emerging trends.

3. Moving Average Convergence Divergence (MACD)

• Measures relationship between two EMAs.

• MACD = 12-day EMA – 26-day EMA

• Signal line = 9-day EMA of MACD line

• Trading signals:

  • MACD crosses above signal line → buy

  • MACD crosses below signal line → sell

Combining RSI, MAs, and MACD improves accuracy in spotting opportunities and planning trades.

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Module Recap

• Gold trading strategies include: buy-and-hold, position trading, news trading.

• Gold is a long-term store of value but is subject to short-term volatility.

• Risk management is essential: stop-loss, take-profit, position sizing, leverage caution, study past trends.

• Key technical tools for gold trading: RSI, Moving Averages, MACD.

• Technical indicators support strategy but do not guarantee results.