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Things to know when trading gold


The Golden Post

Here are the four basic things you should know about trading in gold. Keep abreast of each of them and you are a long way to understanding what makes the gold markets move.

Real returns.

What are the real returns? Real returns are a bond yield minus inflation. Falling real yields are good for gold, and rising real yields are bad. If inflationary pressures subside quickly, it means real yields may start to rise and that’s pressure for gold. However, look at actual returns in conjunction with the USD. Ideally, you want real yields and the USD to move in the same direction to get conviction of a move. See the USD point below


The USD has a strong impact on gold. The strength of the dollar is a headwind for gold and the weak dollar is a tailwind for gold. This means that you need to have a good understanding of what is driving the USD. The USD is tricky because it has different drivers at different times. Last week, for example, the USD was driven on different days by its three drivers. Safe haven demand, reflation expectations and Fed policy changes. See the dollar smile theory for a better understanding of the drivers of the USD.

Things to know when trading gold

Seasonal demand

Gold tends to have a high physical demand in January and August due to the physical demand for the Chinese Lunar New Year and the Indian wedding season.

Things to know when trading gold

ETF levels

An ETF is a type of security that tracks an index, sector, or commodity. They have become increasingly popular as financial instruments. When etf gold levels rise, it helps gold prices to rise and vice versa.


If you have an eye on what these four things are doing, you will be well on your way to avoiding entering the gold market at the wrong time and knowing when a good opportunity presents itself.