Gold trading: is 2020 going to be another bullish year for the yellow metal?

It is commonly known that gold is the ultimate safe haven asset in times of global economic and political uncertainty. When the market is on a risk off mood, there is a sharp spike in the price of gold and the recent tensions in the Middle East paired with the looming global recession have been the driving force behind the appreciation of the precious metal.

Gold trading: is 2020 going to be another bullish year for the yellow metal?

Gold trading: is 2020 going to be another bullish year for the yellow metal?

It is commonly known that gold is the ultimate safe haven asset in times of global economic and political uncertainty. When the market is on a risk off mood, there is a sharp spike in the price of gold and the recent tensions in the Middle East paired with the looming global recession have been the driving force behind the appreciation of the precious metal.

 

Gold’s status as a safe haven is why investors move to purchase gold during times of financial crisis. Its scarcity and appeal as a symbol of wealth and prosperity is the reason behind the metal’s proliferation in the financial markets as an investment vehicle which places it far ahead other precious metals such as silver, platinum and palladium.

In recent years, gold trading has been in demand more than ever before and its price has surged to $1551.88 per ounce. The price of gold is measured in US dollars which has become the de facto standard of measuring its value.

 

How to trade gold

Gold’s high demand has allowed investors to hedge against inflation by buying gold bars, but recently, traders can benefit from price fluctuations by trading various financial derivatives such as ETFs and CFDs.

Contracts for difference (CFDs) are a particularly attractive investment vehicle because it allows traders to trade with leverage – high amounts of capital offered by a broker, which boosts a trader’s buying power, giving access to large positions even with a small account.

With CFDs, instead of outright purchasing gold physically and storing it in vaults like several banks, traders now have the opportunity to speculate on its price movements and realize gains as if they bought and sold the actual metal itself.

Therefore, CFD traders can buy or sell gold units depending on if the price is going up or down respectively and realize incredible profits in a matter of minutes or hours. The profits are usually magnified with the use of leverage, but it should be noted that leverage also increases risk exposure and should be used wisely.

 

What drives the price of gold?

If you are interested in learning how to trade gold, you should know which are the factors that affect its price on the charts.

 

  • Supply and demand

Supply and demand are major factors in the price movements of any tradable market. As demand for an asset or commodity rises and supply dries up, the price will start increasing. An endless supply usually translates to cheaper prices, but this of course isn’t the case with precious metals. 

In fact, gold has been rising in demand the last few decades not only because of its uses in jewelry and technology, but also for investment purposes. The latter accounts for 40% of the global gold reserves.

 

  • The price of the US dollar

While the US dollar used to be backed by gold reserves, since the repeal of the Gold Standard, the price of gold has an inverse relationship with the price of the dollar. This means that when the price of the dollar starts dropping on the global stage, investors will sell their dollars to buy gold instead, increasing the demand for gold the consequently its price.

 

  • Interest rates

Central banks use monetary policy to control inflation and hiking or cutting interest rates is an effective way of doing just that. Foreign investors are always seeking for currencies with higher rates to invest their money and therefore rates can affect the price of gold as well.

 

Gold price outlook for 2020

A decade ago, gold was ranging at $1.100 per ounce which means that by the end of 2019, the precious metal surged by 43% as it’s currently trading at $1551.88.

The majority of analysts forecast that the coming decade will continue this trend and demand for this safe haven asset will skyrocket. In which case, gold prices in 2020 could see a boost to the $1.900 level or even higher.

If you want to see how gold is faring on the price chart, just search for the XAU/USD pair in your trading platform.

If XAU/USD continues this rally, even an increase to the likely targets of $1.555 or $1.630 per ounce, could provide returns up to 100% for bullish traders.

Some of the of the more optimistic 2020 forecasts place prices at $3.000 or even higher, which could mean incredible profits for gold traders with buy positions in gold.

 

If you want to take advantage of this incredible opportunity in 2020, sign up for an account with CM Trading and get in touch with your personal trading specialist for more information on future price movements.

Register now!

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on whatsapp
WhatsApp
Share on email
Email

Recent .

Stock of the Week: Apple in huge demand, beats estimates by billions.

Stock of the Week: Apple in huge demand, beats estimates by billions. Apple beat estimates for quarterly earnings by billions of dollars. We look at …

Read More →
Stock of the week: Facebook makes CEO Mark Zuckerberg $8 billion in just one week!  

Stock of the week: Facebook makes CEO Mark Zuckerberg $8 billion in just one week!   It has been a momentous week for Facebook CEO Mark Zuckerberg who …

Read More →
Big Tech earnings roll in – Huge profits for Google, Microsoft and more! 

Huge profits for Google, Microsoft and more! Major big tech companies have released their quarterly earnings. We look at how some of the world’s biggest businesses performed so far this year!     Google, …

Read More →
MetaTrader 4 vs MetaTrader 5 – which is the better platform?
Bitcoin bounces back: Is buying the dip worth the risk?

Bitcoin bounces back: Is buying the dip worth the risk?  Bitcoin has recovered some of its losses following its fall from a record high of $65,000. Considering the crypto king’s astonishing performance in 2021, should …

Read More →
Oil summit: Waste of time
Oil market outlook: bumpy ride ahead?

2020 has been disastrous for the oil markets, however, it appears that oil has recovered most of its losses and is now hovering near pre-pandemic levels. In today’s article we will take a look at oil’s recent performance and explore the opportunities that may lie ahead.

Read More →
Dollar still on ten month lows while AUD gains
Stock Market Forecast: S&P 500, Dow Jones, NASDAQ Predictions and Analysis for 2021

With 2021 just around the corner, financial analysts are offering their outlook on where the stock market is headed in the coming year — and many of these experts are hoping for a bullish outcome. Read on.

Read More →
˄