Why Trade Gold

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Gold has been used as a form of payment since early civilizations, making it one of the oldest currencies globally. It has been recognized for centuries as a store of value, meaning it can hold its worth over a long period and doesn't depreciate. This enduring quality is one of the reasons why many consider it a symbol of wealth.

This precious metal, known for its high malleability and resistance to degradation, is among the most widely traded raw materials worldwide. Due to its popularity and high value, its price experiences greater fluctuations than other commodities. Many online traders view these price movements as excellent trading opportunities to potentially gain more profits.

In this article, we'll explore the concept of gold trading, the factors that influence its price, and how you can trade it online alongside other assets.

What Is Gold Trading?

Gold trading involves speculating on the price of gold to make a profit, and there are several online methods to do this. On Deriv, you can trade gold using Contracts for Difference (CFDs) and options.

CFDs and options allow you to predict gold's price movements without needing to own or purchase physical gold. These trading methods provide greater flexibility, as you're not limited to the conventional "buy low, sell high" approach. This flexibility enables you to potentially profit from both rising and falling markets. Regardless of your trading direction, your goal is to correctly forecast the market's future direction.

With CFDs, you can take long or short positions and maintain your trade for as long as you have sufficient capital. The more the market moves in your favor during your trade period, the greater your potential gains. However, if it moves against you, your losses will increase.

In contrast, with options, you predict price movements within a specific timeframe. You know your potential payout in advance, and your losses are limited to your stake.

Factors Affecting Gold Prices

As with any other asset, gold's price is influenced by both supply and demand dynamics. Gold prices decrease when the market becomes oversupplied and demand is insufficient. Conversely, when demand is strong and supply is limited, gold prices rise.

Several factors impact gold's supply and demand, leading to significant price fluctuations. Here are three key factors:

1. Value of the US Dollar: Gold is denominated in US dollars, and its price is closely tied to the dollar's value. A declining dollar often drives investors to seek alternative investments to preserve their wealth, with gold being a favored choice due to its intrinsic value. Additionally, a weaker dollar can increase the purchasing power of other currencies, potentially boosting demand for gold and causing its price to rise.

2. Rising Inflation: Inflation occurs when a currency's purchasing power diminishes. During times of market volatility, people seek safe-haven assets, which are investments expected to retain or increase in value. Gold is commonly considered a safe-haven asset due to its relative stability compared to other markets. Many use it as a hedge against inflation to mitigate potential losses.

3. Scarcity in Production: Gold production primarily relies on mining and recycling. However, as most of the world's gold reserves have already been mined, the finite nature of gold suggests its depletion over time. While recycling and advanced mining technologies help meet demand, any new discoveries can temporarily spike gold prices due to increased demand outstripping supply.

Platforms for Gold Trading on Deriv

You can trade gold through various platforms on Deriv:

CFDs: Trade gold on Deriv MT5 and Deriv X. Deriv MT5 is a popular CFD trading platform equipped with analytical tools, technical indicators, and more. Deriv X is a customizable platform designed to fit your trading style, offering advanced features.

Options: Opt for DTrader and DBot for gold options trading. DTrader provides flexible trade durations with positions available at low stakes. DBot is an automated trading platform that allows you to create your trading bot in five simple steps without requiring coding skills.

Practice gold trading risk-free by signing up for a free demo account preloaded with $10,000 USD in virtual money. These demo accounts are available on all the platforms mentioned above. Once you feel confident, you can switch to a real account.

Disclaimer: Options trading on commodities using DTrader is not available for clients residing within the European Union or the United Kingdom. Deriv X is not available for clients residing within the United Kingdom or the European Union. DBot is not available for clients residing within the United Kingdom.