Gold analysis (The ISO 4217 currency code for one troy ounce of gold) is based on the trading of this expensive metal in global markets. Gold is one of the oldest, most important, and most fundamental economic assets of any country or land.
In the past, it was used as a unit of payment and exchange. Currently and throughout history, gold has been commonly minted as coinage, jewelry, and bullion. Over time, due to the complexity and difficulty of the extraction process, inflation, and political changes, gold has become more and more expensive and is now a significant part of the market, although its value will vary depending on the currency and monetary unit of each country.
Trading gold in the global Forex market
Gold Trading, or Gold analysis, is essentially related to trading gold around the world. In general, this process is carried out in a simple environment. Since gold has a certain price, there is no need for marketing or any other activities.
In addition, the Forex market provides the ability to trade this expensive metal by using a leverage system that allows investors to accumulate capital over time by analyzing, reviewing, and analyzing market trends and make better trades.
Gold trading, also known as XAU, is recognized worldwide and it can be said that this metal also has the ability to trade with multiple currencies.
Gold trading on the Forex market can be a logical way for those who are looking for a diverse buying portfolio. Furthermore, the question is often asked if trading gold in the global market is a good opportunity for earning income and, of course, growth?
In response to this question, it must be said that it is not possible to give a precise and definite answer for this issue; the important issue is that everything depends on investment, conditions and also the progress.
Governments sometimes in order to raise the value of their currency, they tend to produce and circulate money which in turn causes the decrease of the currency value and creates inflation, but gold will not be produced and it is extracted as a mineral, thus it will not be involved in inflation issues and it will be faced with an increasing price trend over time.
How is the analysis of gold prices done?
In continuation of the discussion on gold analysis, the question of how to predict pricing in the future is raised. Previously, we have talked about technical and fundamental analysis in articles.
Of course, the possibility of using these two key platforms also exists. When World War II came to an end, the world was trying to regain stability, but there was a lot of debt and inflation.
In 1944 at the Bretton Woods Conference, representatives of 44 different countries decided to set the world gold price at a minimum of $35 per ounce for 20 years. They also agreed to convert the dollar to gold and ensure that there is enough gold to support all international trade.
One of the reasons why gold still has value is that people have deemed it valuable. Gold is more valuable than other metals because people consider it more valuable.
This belief stems from human psychology and the tendency for people to hoard wealth, tangible assets, and expensive metals, among other things. In general, futures or Forex and options trading are the two main ways to trade gold in the market.
Analysis of gold is used for both of these matters. The tools used in this field may also vary depending on the individual’s needs and expertise. To trade gold, you must use a strategy to sell it at the right time and buy it at the right time.
What things change the price of gold?
Before anything else, you should know that:
- The decline in the value of the dollar
- Economic instability and market turmoil
Are two main and important reasons cause the price of gold to change. Note that none of the strategies that you can use will ultimately be decisive.
To some extent, it depends on the economic, political and country’s situation, communications, American market, dollar and euro. One of the most important factors in analyzing gold trading is that the relationship between the dollar and gold is completely inverse.
Increased inflation, the economic situation in America is destabilized, as a result, the price of gold increases. In the same vein, gold transactions and analysis are also increasing day by day.
What is fundamental analysis of gold?
Fundamental analysis of gold, which is performed in the global Forex market, is a comprehensive control for pricing and forecasting. Currently, gold is not only used for investment purposes but also for many other industrial uses.
India, China and America are major gold consumers in the world and it is interesting to know that India has allocated about 25% of the global physical demand for itself.
Typically, demand for gold increases during specific occasions and causes an increase in price.
The factors influencing fundamental analysis of gold Annual data from the World Gold Council between 1990 and 2015 highlight important factors for gold demand.
These factors affect fundamental analysis of gold. Demand for gold is primarily driven by income level. For every one percent increase in annual income, demand for gold increases by one percent.
As the price of gold increases, so does demand for gold. For every one percent increase in price, demand for gold decreases by 0.5 percent. As of mid-2021, the price of gold was over $1,700 per ounce, which was a decrease of more than $300 from September 2020, but still notably higher than the values under $100 recorded 50 years ago.
What is technical analysis of gold?
To understand why technical analysis of gold is important, let’s first define it. Simply put, technical analysis for price is a method of predicting future prices by studying past market data, primarily by looking at the price and volume. Forex analysis, in particular, is a key aspect of this discussion.
Analyzing the upward trend by looking at past price increases and providing evidence for future profits is one aspect, while analyzing the downward trend by looking at past price decreases and how it may indicate further decline is another.
In terms of analyzing side trends, this can be used by market analysts when the price of gold is at a specific level for a certain period of time and can indicate whether to expect an increase or decrease in the future.
3 Important components of gold technical analysis
Technical analysts of gold strive to identify patterns and price trends in the market and then use this data to predict future prices, which can ultimately strengthen the portfolio of investors. Forex analysis is particularly helpful in this regard.
Although price is undoubtedly the most important aspect of technical analysis, movements and sentiments also play a crucial role in understanding gold movements. Here we will focus on these three aspects.
Price
Most technical analysts agree that price is the most important factor in their work. A specialist in the field of economics and Forex gold analysis recently stated, “Price is one of the three important components for entering the technical analysis of Forex gold.”
Momentum
When Forex traders look at technical analysis of gold, they also see momentum or trend quickly. When analysts are trying to determine the strength or weakness of the gold price at a specific moment, tracking speed is beneficial for analysts.
It should be noted that momentum is generally more useful in markets that are growing rather than declining. This is because markets tend to rise more than they fall.
Sentiments
This aspect of technical analysis attracts the attention of investors. It deals with their feelings about a specific commodity and how it helps shape and change its value. Sentiment refers to the tone of the market. This is evident through the activity and movement of gold prices in that market.
Technical analysts often take market sentiment into account due to its impact on technical indicators. For example, when the Federal Reserve changes interest rates, market sentiment can be high or low.
Since gold is also affected by the movement of the US dollar, factors such as geopolitical tensions or an overheated economy can also affect sentiment.
Final Summary
Forex analysis of gold is, for many, a profitable but complex endeavor that can result in exceptional returns when made in large investments.
However, this is only possible if the principles of the market can be found based on the combination of the two main components, technical analysis and fundamental analysis, without taking into account biases and emotions.
In this article, we have discussed the key elements of gold analysis, as well as the information set that exists in its two main areas. Of course, these notes can eventually become a routine part of the needs of individuals who intend to participate in the market and analyze gold in the Forex market.