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Fundamentals of Gold Trading

05 Jan 2023

A large number of individuals think that trading or investing in the stock market is the only way to create wealth. However, they fail to understand the importance of another asset class that’s widely used by many for wealth creation - Gold. 

In India, we’ve long held the notion that gold as an investment is the best way to create wealth over the long-term. While that’s true for the most part, did you also know that you can trade in gold? 

Yes, you read that right. You can trade in gold just like stocks. The commodity market is where you can trade in gold and its derivatives like futures and options. That said, here are some tips and keys to trading in gold that you can implement to help you on your journey. 

Tips and keys to trading in gold

1. Get to know what moves gold 

Firstly, one of the most important keys to trading in gold is getting to know the factors that impact the prices of the precious metal. There are three primary things that influence gold prices - inflation, investors’ sentiment, demand and supply. 

When the rate of inflation is high, more investors tend to invest in gold since it has traditionally been known to beat inflation. This would lead to a spike in the price of gold. Similarly, if the investors’ sentiment towards gold is positive, the price of gold would rise and vice versa. And finally, with more demand than supply, gold prices will rise and with more supply than demand, gold prices will fall.

Knowing this information can help you trade gold in a much better manner by enabling you to take appropriate positions. 

2. Take into account geopolitical implications  

Gold commodity trading is also influenced by several geopolitical factors as well. Geopolitical tensions and economic uncertainty usually tends to drive the prices of gold upward. Also, gold is strongly correlated to the U.S. Dollar and other major currencies. 

And so, whenever the currency market is under turmoil, gold prices will usually rise since investors tend to park their funds under stable havens like the precious metal. So, before trading in the precious metal, it is a good idea to always consider the current geopolitical scenario. 

3. Use technical indicators 

Technical indicators such as chart patterns, Relative Strength Index (RSI), and moving averages, among others, give you a lot of information on how the price movement of gold is likely to be. 

You can use the information provided by technical analysis techniques to take positions accordingly. This will not only bring down the chances of your positions going awry, but will also increase the chances of earning profits on your trades.

4. Track the production of gold

Considering the fact that the production of gold is an indicator of supply, it can be a very good indicator of how the price of gold is likely to move in the near future. The more the production of gold, the higher the supply would be, and the lower the prices of gold are likely to be. And on the contrary, if the production of gold is low, the supply would be low, which would ultimately push the prices of gold upward.  


There you have it - four primary keys to trading in gold. Now that you’ve been apprised of gold commodity trading, go ahead and give it a try. That said, if you don’t have a demat and trading account already, then Motilal Oswal can help. Visit the website to open a demat account instantly within just a few minutes. 

Related Articles: Want to Open a Demat Account? Here's What You Should Know | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

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