Gold has had a rough year. It started 2015 at $1,186.50 per ounce. Then, in late January, rose to a high point of up over $1,300. Right now, it stands at just $1,089.3, with its short term future quite unclear. Gold has been far more volatile than it has been in years, and the solid upward movement that investors are accustomed to seeing has been nonexistent.
Some experts believe that gold has not yet hit its support level and that a further dropping of prices is inevitable. There is good reason for this assumption. The Federal Reserve is expected to raise rates later this month, and this will most likely harm stocks short term. When stocks drop, the dollar goes up, and gold goes down. This is far from a certainty, but it is the most probable result over the next few weeks. Gold is expected to go up over the long run, but with severe price drops–some people believe that gold could go down below $900 per ounce at some point in 2016–it could be years before gold rebounds to its former high point.
This kind of speculation can be harmful to traders, especially binary options traders that focus on ultra short term price movements. Gold is a long term investment, and although there is a ton of opportunities for those that have a short term focus to create profits, just watching current price trends and trying to capitalize off of them can be a dangerous pastime if there is not an educated reason behind your trades. What one or two experts say on their own is not enough for you to create a solid trading strategy, unfortunately. If it were this easy, everyone would make money trading. Instead, more than 90 percent of traders end up losing money long term.
First, realize that the long term prognosis for gold is still upward. It has moved upward steadily for years and twenty years from now, there’s a better than decent chance that gold will be up over $1,500. It could even be twice that, depending upon what the U.S. dollar, inflation, and the worldwide economy does. All of these have a direct or indirect influence on what happens to the price of the dollar. But, what happens 20 years from now does not affect what will happen tomorrow. If you are planning on trading gold short term, you need to have a solid understanding of technical indicators and how world events influence this commodity’s price.
Pay attention to what’s going on in the world. Nations like Russia are attempting to boost their reserves of gold, which is seen as an economic hedge in case an economy falters. However, if a major buying trend occurs, it can make gold more scarce, increase demand with others, and drive prices up. When prices drop is when you will find that this is most likely to happen, and the current decrease we are seeing in value can trigger events like Russia buying more gold, especially if the quantity that they are purchasing keeps increasing like it has been. One report recently released says that November was their largest purchasing month in the last five months, for example.
If you are able to balance these world events with the balancing act that is going on between gold reserves and currencies, and then use technical indicators to anticipate price, trading gold is very lucrative. This is a fine skill and not many traders have the ability to do this effectively over long periods of time. If this is something that interests you, though, there is a lot of opportunity for making money here.