Ultimate gold trading guide

Ultimate gold trading guide

Throughout human history, gold has been the most trusted and stable form of currency. Industrialization, the creation of massive amounts of goods and services through automation, the invention of fiat money, and the digital age have changed most things in our modern-day lives. 

However, what remains unchanged is gold’s reliability and value. Many invest in gold in order to store the value of their money. For some investors, gold is a great way to diversify their portfolio. While for others it’s an opportunity to profit from short-time price speculations.

Things You Should Know About Gold Trading

Gold is immune to a lot of inflationary processes which makes it perfect for storing the value of your funds. Gold is the most liquid metal in the world. Physical gold is used to create jewelry and electronics. What’s more, governments prefer to reserve physical gold rather than invest in Gold CFDs. Investing in gold can help you diversify your portfolio, hedge against risks, store the value of your money, or allow you to benefit from short-time price fluctuations. Gold trading strategies vary among short-term and long-term traders. 

“Gold is a currency. It is still, by all evidence, a premier currency." - Alan Greenspan


Gold trading strategies

There are many trading strategies developed to assist gold traders. The strategies vary depending on whether you are a day trader, swing trader, or long-term investor. 

Price action trading 

Price action trading is widely used in the world of trading due to its simplicity. In order to trade these systems you don’t need any indicators. However, some traders incorporate volume indicators in their price action strategies. Traders are looking for price breakout opportunities and reversal opportunities based on support and resistance levels and chart/candlestick patterns. Volume indicator is especially useful when it comes to trading breakouts. An increase in volume means that the pressure is increasing, and it might result in overcoming the resistance of limit orders. 

What’s more, price action breakout strategies can work in several time frames, making the probability of success greater.

Day trading 

Day traders open and close positions within a single day. Traders that like to keep open positions longer than a day are called swing traders. The reason why many traders prefer to day trade is that it saves on fees that get charged for holding overnight positions.

Generally, there are two types of intraday traders. Scalpers usually use a 1 m chart time frame and make more than 10 trades a day. Other kinds of intraday traders prefer higher than 15-minute timeframes and place 2-3 trades a day. 

One more reason why people choose to day trade is to overcome boredom, which is a wrong way to approach trading. A good trader is like a hunter waiting for prey to step into a trap. 

Trend trading 

Trend trading is utilized by both short and long-term traders. Trend trading strategies are developed to find entry opportunities in the direction of the trend. Especially novice traders find trend trading useful as betting against the market is very challenging. 

Gold offers great trend trading opportunities as the asset is quite volatile. Good volatility simply means that the price makes sharp moves on the chart, creating an uptrend and downtrend. Historically, the gold price has been in an uptrend against the dollar due to inflation. 

There are various indicators to help you trade trends. Keep in mind that indicators that work in trending markets fail to generate buy signals when the price is in a range. For ranging markets, Stochastic Oscillators and Overbought/Oversold trading strategies are useful. 

The moving average indicator is widely used in trend trading across all asset classes, and gold traders can also reap benefits from it. Moving average indicators smooth out the price volatility on charts and make trends easier to identify. For those who use this indicator, it provides entry and exit signals. 

In an uptrend, moving averages serve as support. When the price touches the support line, a buy signal is created. In the downtrend, the moving average becomes a sign of resistance. When trading a downtrend, the touching points between the price action and resistance become the sell signals. It’s important to note that the indicator is not very effective when market conditions change and the price stops trending. 


Position trading

Position trading is typically done by swing traders and long-time investors. The trading style mostly involves fundamental analysis. In Forex, position trading is done by analyzing economic factors such as the Consumer Price Index (CPI), interest rate decisions, trade balance, unemployment rates, and more. 

When trading stocks, position traders are interested in earnings, dividends, number of sales, and so on.

When it comes to conducting fundamental analysis for gold, there is much less information to take into account. However, you can still keep an eye on a number of factors.

  • Supply and demand for physical gold. Gold Futures and gold CFDs are very popular among investors, however, the price of physical gold is highly correlated with gold CFDs and Futures prices. For instance, demand rises whenever the Federal Reserve Bank decides to purchase gold bars
  • Fears of inflation. Inflation generally stimulates gold price growth. During hard times, when currency purchasing power is dropping, investors are looking for ways to protect their wealth and gold is the perfect way to do so
  • In times of war or military tension, wealthy countries try to increase their gold reserves
  • The US dollar is a global currency. USD and gold have an inverse relationship. Expectations on interest rate hikes can make the USD stronger and lower the value of gold and vice versa

News trading

While news trading is related to position trading, it’s not the same. Traders that trade the news are looking for short-term, sharp price movements. Usually, trades take anywhere from seconds to minutes. CPI reports, central bank’s interest rate decisions, Nonfarm Payrolls, and more can create trading opportunities for news traders. 

Investing in Physical Gold

Many investors prefer possessing actual gold assets such as bullion, coins, and jewelry over gold Exchange Traded Funds (ETFs). The reasons vary for every investor. Some love to look and hold an actual asset while others think that ETFs are riskier in the case of total economic collapse, which is pretty unlikely to occur. Some investors like to make coin collections. 

Purchasing physical gold comes with certain challenges such as government taxes, storage issues, trust issues, etc. What’s more, different gold assets have their pros and cons and investors should take into account every detail before making a decision.

Buying physical gold online is an easy thing to do. It must be noted that you should avoid purchasing gold from unlicensed shops and individuals. Many online retailers offer discounts for buying large quantities of gold. Some discount offers are linked to a certain payment method. For instance, you may get a cheaper price for using your credit card. 

Purchasing pure gold is preferable 

Investing in pure gold bars makes it easier to resell later. Physical gold is much less liquid than gold ETFs. It’s best to buy gold bars that are at least 99.5% (995) pure. The rest of the bar consists of an alloy of mainly silver and copper. Silver and copper are generally used for smelting. 


Bullion is precious metal bars. You can come across bars of gold, silver, platinum, etc. Usually, bullion has the name of the manufacturer, purity, and weight stamped on them. 

Bullion is preferred over coins and jewelry when it comes to investing in physical assets. Coins and jewelry cost more per ounce than metal bars. Moreover, it’s easy to see the purity of metal bars. Gold bar prices are more correlated with gold ETFs than coins and jewelry.

Furthermore, countries like to make gold bullion reserves. By far, the USA is the leader in gold reserves, storing 8133 tons of gold. As of March 2022, the second largest billion reserves are kept in Germany with 3358 tons of gold, followed by Italy with 2452 tons, France with 2436 tons, Russia with 2302 tons, and China with 1948 tons. 


Gold coins have an attractive design and historic value. Therefore, they cost more than gold bullion when it comes to weight and purity. Usually, private collectors are into coins. Coin prices are much more speculative than Bullion prices. As of 2022, among the most valuable US gold coins are: 

  • 1933 Saint Gaudens Double Eagle ($20). Priced at $8,858916
  • 1822 Capped Bust Gold Half Eagle ($5). Priced at $8,360,337
  • 1870-S Indian Princess Head Gold ($3). Priced at $6,804,179
  • 1854-S Coronet Head Gold Half Eagle ($5). Priced at $4,564,745
  • 1804 Turban Head Gold Eagle $10. Priced at $4,563,555
  • 1861 Coronet Head Gold Double Eagle ($20). Priced at $2,250,276

Usually, these coins are not made out of pure gold, but their historic value is very high, making them one of the most valuable collectors’ pieces in the world. 

The same is true for jewelry, as prices are usually dictated by design and historic significance. The gold purity varies from item to item, and they usually cost more than pure gold bars. 


Countries that have income and property taxes make investing in gold less profitable. Taxes vary depending on where you purchase or sell precious metals. What’s more, some countries like Italy charge different rates for private investors and companies. Italy charges 6% Value Added Tax (VAT) for companies and for private individuals VAT is 12.5%.

The US Internal Revenue Service categorizes precious metals like gold, platinum, palladium, and silver as Collectibles that are taxed at a 28% capital gains rate. The taxes are high if we take into account that most other assets are taxed at around 15-20% long-term capital gains rate. 

Some European countries do not have taxes on trading gold. Namely, Belgium and Switzerland.

It’s important to note that in Belgium only Pure Gold (999) is tax-free. All other products have a 21% value-added tax. In Switzerland, gold bars and gold coins are free of taxes. On the other hand, other precious metals like silver and platinum are taxed at 8%.

Additional Details About Investing in Gold

Gold is the most liquid metal in the world. Meaning there is a great volume of gold CFDs, futures and, physical gold traded every day. High liquidity makes the difference between the bid and the ask price almost non-existent. What’s more, investors who wish to buy or sell huge amounts of gold assets can do so without worrying about slippage. 

Moreover, there’s a physical demand for gold. Namely, from: 

  • Central banks trying to increase their reserves.
  • Retail investors who like to keep actual gold bars and coins.
  • People who buy jewelry made out of gold.
  • Gold is a great conductor of electricity and is very useful for creating small gadgets like phones and computer parts.

It’s great to know that the asset you have invested in has generated some degree of real-world demand. On the opposite end, cryptocurrencies have very little real-world value. In fact, some cryptos like Bitcoin consume a lot of electricity. The demand for Bitcoin is mostly speculative. For some reason cryptos are called currencies, meanwhile, they don’t meet the criteria for this classification. Cryptos are too unstable. Due to the high volatility, you can’t go to your local shop and expect the same item to cost the same coins during the course of the day. On the other hand, the idea of online money that is free of Governmental control is amazing and hopefully, someday we’ll have stablecoins backed by actual assets. 

Gold is very stable. For the same reason, it is a great tool for hedging risks. Many retail and institutional investors buy gold assets and spread out their investments. By putting eggs in different baskets, funds are much safer. Gold is often viewed as a hedge against inflation and rightly so. 

"I have always believed that gold is a store of value and that it is a hedge against inflation." - Paul Tudor Jones

Gold is a great way to store value, but its return potential is not so great. As mentioned above, gold has an inverse relationship with inflation. From 1960 to 2021, the average annual inflation rate based on the Consumer Price Index (CPI) in the USA was just 3.8%. The average return from investing in the S&P 500 was around 7%. In general, investors take S&P 500 numbers as the base point for measuring investments. If you can make higher profits, i.e. beat the market, you are a successful investor. 

The low annual returns of gold might be a curse as well as a blessing for this commodity. Such assets do not attract a high number of speculative investors like many cryptocurrencies and pyramid schemes do. Stability is gold’s strength. 

The Future of Gold

Gold is a limited resource on this planet. Of course, new gold mining opportunities can always be found, but in general, the earth cannot make more gold out of thin air. For this same reason, gold has been very resistant to inflation. 

However, this might change as we develop technologies and step outside our planet. The universe offers unlimited resources that are waiting to be mined. 

A metal-rock asteroid in our solar system called 16 Psyche is a huge subject of interest for NASA scientists. The asteroid is estimated to be entirely made out of Nickel, Iron, and has a solid gold core. The asteroid is 226 kilometers wide and is situated between Mars and Jupiter. The estimated value of the precious metals it holds is $10 000 quadrillion. NASA is developing projects to further study the asteroid using spacecraft and see if mining it in the future might be a viable undertaking. 

The Psyche asteroid is one of many floating around in our solar system. We may not be very far from mining cosmic wealth such as precious metals and diamonds from asteroids just like this one. There are many skeptics arguing that we’re centuries behind when it comes to space mining, but they forget to mention that you should never bet against technology. Where there’s huge profit potential, many inventors and innovators start overcoming the obstacles very fast. 

Not many would have guessed that on December 21, 2015, SpaceX would be able to successfully land its Falcon 9 vertically, making it reusable for the first time ever. Reusability is the key when it comes to making space flight affordable. 

SpaceX has not made public statements about its plans to mine asteroids, but the company is developing a reusable spacecraft called Starship that may become a platform for other companies in the future. For instance, AstroForge is already in talks with SpaceX to gather valuable minerals in space to conduct research. 

What’s more, there are many space mining startups created around the world working on robots, techniques, and strategies that could be used to effectively bring precious metals from space. 

What will happen if asteroid mining becomes a reality in our lifetime? Will all of our cases be made out of gold alloys? But most importantly, what will happen to gold as a source of value storage? 

Gold is as valuable as we perceive it to be

In the eyes of most investors, gold is a hedge against inflation. Yes, there is a demand for physical gold, but the world’s gold reserves are far greater than they can ever be used in electronics. 

There’s no need to increase the supply of physical gold to crash its price. Even a small success like landing the first mining mission on an asteroid can make a shift in investors’ minds.

Gold and cryptocurrencies

One more thing to consider when talking about the future of gold is digital currencies. As of today, gold is used as a hedge against the dollar. The dollar is characterized by annual inflation and the currency has an inverse relationship with the price of gold. 

What happens if cryptocurrencies become the dominant currency in the future? Most cryptos have built-in scarcity. For instance, Bitcoin is becoming harder to mine each year and has a cap limit of 21 million. Meaning, once it reaches 21 million, no more can be mined. Once you have a limited currency, you don’t need to use gold to hedge against inflation. 

It’s hard to predict whether crypto is the future of money or not. It’s even harder to foresee the relationship between cryptos and gold. 

Tips for Trading Profitably

There’s no single way to succeed in trading. What works for some may never work for others and vice versa. In trading, this is even more prevalent. However, there are some mistakes that can lead all traders to blow up their accounts. Here are some tips that are universally applicable for trading all of the asset classes.

Don’t overtrade

Overtrading is common among novice and professional traders alike. It’s difficult to say why so many traders are overtrading. Among plausible reasons are:

  • Greed
  • Boredom
  • Not having a working strategy
  • Revenge trading

Greed and boredom are the two biggest reasons why most professional traders lose their money. At this stage, they probably already have some sort of trading system, but the problem is that the money they make is not enough. Greed can make traders change their trading strategies and increase exposure to the markets or make them open positions that are against the strategy rules. 

Boredom is another good reason why investors, especially day traders, blow up their accounts. Sometimes the best trade you can make is to not make any trade at all. Feeling bored can make traders open unjustifiable positions that wipe out their winning trades.

Trading without a strategy is common among novice traders. Every strategy you can find online should be tested, polished, and fitted to the trader that uses it. Beginner traders have no clear rules on when to open and close positions. Which leads them to overtrade.

Revenge trading is very common. When some traders lose money, they think the markets owe them something and place orders after orders in the pursuit of getting the money back. It’s important to keep your emotions in check. One way to protect yourself from revenge trading is to only risk a small amount of your portfolio on each trade.

Don’t trade out of necessity

Trading is not a job, it’s a business. Meaning, you should not be expecting a stable paycheck at the end of the month. There might even be periods when your account goes down. When your only source of income is trading and the bills need to be paid, it’s difficult to keep yourself from overtrading and risking more than you can afford to lose. 

One way to protect yourself is to plan your finances well. Have an emergency fund and set aside enough money to let you operate for at least 6 months. One more way is to create side businesses and get multiple sources of income.

Many mutual fund managers take fees from investors in advance. This helps them operate stress-free whatever happens.

Don’t trade without a working strategy

A trading strategy is a set of rules that gives traders a clear idea for entering positions, exiting positions, risk amounts, stop-loss placement, take-profit targets, preferred asset classes, and more. It’s very difficult to find a random strategy online and make it work. What works for one trader, will not work for another. What’s more, it takes a lot of time to develop and test a strategy on your own, and it might stop working as market conditions change. 

Traders need to be fully confident in their system as it helps them to manage emotions. One way to check if the system is working is to test it. There are two ways to test your system: manual and automatic. Manual testing is done using historical data. Automatic testing is conducted using algorithms.

Never risk more in a single trade than you can afford to lose

If you love gambling, go to a casino. When investing, it’s important to keep a clear head. Trading is a game of analysis and probability. When you find trading setups that give you an edge, it’s time to use risk management to profit from the markets. Sometimes you win, sometimes you lose, but at the end of the day, the edge guarantees a gradual growth of your account balance. Taking large risks makes success dependent on pure luck. Luck, hope, regret, fear, and many similar words need to be avoided in the world of investing. 

Pros and cons of investing in gold

Just like investing in any other asset, investing in gold offers some pros and cons. Moreover, there’s a difference between investing in physical gold and gold CFDs. 

Immune to inflationLow historic returns
Diversify portfolioTaxes on physical and ETF gold
Volatility Storage of physical gold
Gold Futures ETFs and CFDs are liquidPhysical gold is less liquid

What Did We Learn From the Gold Trading Guide?

We’ve learned that investing in gold helps diversify portfolios and hedge against inflation. Gold is actively traded by day traders, swing traders, and long-term investors in the financial markets due to high liquidity and good volatility. Gold trading strategies are categorized by: 

  • Price action
  • Day trading
  • Trend trading
  • Position trading
  • News trading

Taxes vary in different countries on purchasing physical gold. That includes gold bars, coins, and jewelry. Gold’s future perspective is uncertain thanks to potential space mining and crypto money.

"Gold is a hedge against economic uncertainty." - Alan Greenspan

FAQs About Gold Trading

Is it a good idea to trade gold?

Trading gold is a great idea as it is characterized by liquidity and volatility. Just keep in mind that while Gold CFDs are highly liquid, trading actual gold bars can be a challenge. 

Why is gold considered to be a safe investment?

Gold has been a very stable asset throughout human history. During periods of high inflation and economic hardships, investors purchase gold-related assets, thus increasing their value. Gold has an inverse relationship with inflation.

What are the negatives of investing in gold?

Gold has a very low annual return. Making it less attractive to speculative investors. Purchasing actual gold bars and coins is associated with low liquidity and high government taxes. What’s more, holding physical gold requires a safe place to store it.