How to Trade Gold

Gold shares are unique. Most indexes have followed pretty much the same pattern. Not gold. We thought today we’d have a look at something out of the norm, to see if there are some gains brewing.

Gold is a favorite of investors, whether they have a few hundred dollars or millions. An investment in gold coins and bars (known as bullion) is a good hedge in uncertain economic times. If you take the time to learn the factors that affect the price of gold, it’s relatively safe and can be quite profitable. If you are wiling to take risks, you may want to invest in gold futures. Strictly speaking, trading in gold futures isn’t investing; it is speculating (a polite word for gambling). The lure is understandable people can and have become millionaires. But be warned. Most first-time traders in gold futures lose their money.

Commodities and stocks have been on fire the past two weeks and I think it just may be time for things to take a breather. While I continue to stay long, taking some money off the table to lock in profits is a safe play. Just from a quick glance at the charts we can tell the odds are pointing to some type of pause or pullback in the coming days. I figure any day now we could see some profit taking.

Many people want possession without thinking about it too much. But for all the comfort that they derive from the feeling of a gold bar in their hand, few who have tried selling a bar from private possession would take possession again. They learned, when they tried to sell, of the big trading costs that go with the private possession of small bars or coins.

Gold ETF Trading - GLD

The Gold ETF is one of my favorite trading vehicles. Using simple trend lines and looking at the recent price action you can see that the price of gold is looking ready for a pullback. Buying at this level is chasing and that generally means you buy at the high and panic out at the low.

By using inter-market analysis and having a game plan trading can be simple and effective. Our trading model does not find bottoms or tops, but sometimes its does surprise me how close it can be. Our key focus is risk management and to capitalize on the body of the price movement.