Gold has long been regarded as a safe-haven asset since before the advent of modern civilisations. Many people associate gold trading with the buying and selling of physical gold, also known as gold bullion.
However, trading gold in the global financial markets is different as it does not involve buying and selling actual gold. Instead, it involves the buying and selling contracts between two parties, also known as contracts for difference (CFDs).
Trading gold in the financial markets refers to making a bet that the price of gold will rise or fall in future and either buying or selling a contract for difference (CFD). Traders in the Malaysian financial markets can buy gold CFDs as a safe-haven asset in times of crises, and they could sell the CFDs when they believe that the future is promising.
Here are some factors that affect the price of gold and its CFDs:
Supply and demand
The available supply of gold in the markets usually determines its price since a high supply of the yellow metal coupled with low demand typically results in lower prices. While low supply coupled with high demand usually results in rising prices.
The US dollar’s value
The US dollar is also regarded as a safe haven asset and competes with gold for investor funds. A strong dollar usually results in lower gold prices, while a weak dollar usually triggers a surge in gold prices.
Central banks
Central banks are some of the largest buyers of physical gold. Rising demand from Central Banks could fuel a rally in gold prices. Central banks buy gold as a hedge against the devaluation of their currencies.
Political and economic crises
The price of gold tends to rise in times of global political and economic crises in addition to natural disasters. Periods of relative global economic and political stability usually lead to falling gold prices.
Interest rates
The demand for gold increases when the interest rates fall and are no longer sufficient to compensate investors for losses in case of defaults and economic crises, which leads to an increase in gold prices.
Inflation
High inflation rates typically lead to a decline in a currency’s purchasing value, making the currency unattractive to consumers and investors alike. Therefore, they prefer to buy gold to preserve the value of their money and act as a currency leading to higher gold prices.
You can trade gold CFDs by opening an account with a broker who offers the commodity as a tradable instrument. You can choose between a demo and a real account, but only the trades executed on a real account can generate profits because you would be trading with real funds. A demo account usually has virtual funds, which are not the same as actual funds.
However, the question remains, does one need to be an experienced trader to trade gold in Malaysia? The answer is no; gold trading does not require one to have extensive trading experience. You can read a guide on how to trade gold and start trading the yellow metal in a short amount of time.
Regardless, long-term success in the markets requires a good understanding of trading and the financial markets. You also need to have the necessary capital to trade gold on a real account.
There are multiple ways through which traders and investors from Malaysia can trade gold, namely:
Gold bullion or coins
Gold certificates
Gold futures contracts
Investment funds
Gold CFDs
Finally, when you start trading gold, you must follow the political and economic news that could impact gold prices, either positively or negatively. You should also follow the US dollar’s movements as they have a significant effect on gold prices. You should also follow the technical analysis of gold charts to identify low-risk, high-reward buying and selling opportunities.