How To Succeed In Trading Gold Futures

Since the ancient times, gold is a safe-haven investment for wealth retention, especially when there are inflation fears. Gold futures are formal contracts to buy or make delivery of physical gold bars in a future date. The price in the contract is determined when the contract is written.  As prices change, the value of the gold in the contract also goes up and down.

How To Succeed In Trading

Anyone who wants to make a success in gold futures trading would need two things. One, he must learn how to analyze the price charts and decide where the price would go next. How right is the decision would need the reading of the market conditions. Then, he must pull the trigger and commit placing the buying or selling transaction in the market.

Understand The Price History

From the Middle Ages until 1931 gold prices have been fairly stagnant. In 1931 the british dropped the gold standard. These causes wild fluctuations. 4 years later, United States officially set the price at $35 an ounce. Another six years later, the British start to devalue the pound, and causes gold to rise from 8.66 pounds per ounce to 12.50 pounds per ounce. Another 30 years later, United States start to devalue the dollar, and causes gold to rise $42.22 per ounce. Dollar floated and gold rose greatly to $850 or just a little under 400 British pounds per ounce.

What Really Determine Prices?

Gold future prices are based on the current spot gold prices and public's perception of its value. It is hard to tell which direction prices are heading and how much of a movement there will be. Today, gold future prices generally have a weekly volatility of $100 and are relatively high compared before 1931. Taking inflation into consideration, gold price is relatively low compared to the early 1970s.

In the past ten years, many central banks have reduced their gold holdings, flooding the supply in the open market. Some experts has stated that this trend will reverse in the next couple of years causing gold prices to go up again.

Other reasons for gold price to increase is that worldwide demand remains high as governments use it to combat inflation. It is also regarded as the international medium of exchange. Gold mines and depositories decide the supply of gold on the market. If holdings in depositories increased and mines are not able to keep up with demand, prices will rise.

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