Gold has been a highly valued metal throughout
human history. The other day I was reading up
on some macro trends concerning inflations and
money management. I found that right from
1500BC, gold has been actually used as an
economical vehicle much like the modern-day
currency.
The scarcity factor and the industrial advantage
of this metal have made this the most sought-after
and fought-for commodity. Cities and kingdoms
have been brought to dust, for a few glittering
yellows. Today, it's ironic how a technical
understanding of candlestick charts and other
parameters like the Dollar index can keep
away so many tears and bloodshed!
The changing story of Gold and Money
In 1971 US President Richard Nixon declared
that the United States would not consider
gold, the fixed denominator for printing money.
Since then, it has all become apparent that
the value of gold is what and how much the
US Dollar is able to buy for it.
Hence, the easy mathematical interpretation
is that the two are inversely related. Gold gets
cheaper when USD is getting expensive
and is in high demand. The opposite is true
for a falling USD valuation. The Dollar Index
is a good focal point for studying how to trade gold.
Look at this image to understand the point better.
How Gold became the Safe Haven
Gold due to its appeal as a safe haven is
considered a good hedge against stock market
volatility and I see that people are much
more vocal and propagating the buying
of physical gold etc, especially when there
is a crash like that during March '20 crash.
The idea of scarcity when it comes to gold
has been really rewarding. The opportunity
to hedge against a recession even in 2023
or 2022. is a juicy opportunity. There is
no good way of equating the information
contained herewith to actual market conditions,
but nevertheless, investing in Gold has always
been a good option for investors.
Store of Value, How you can store it too
Physical Gold
Historically, gold has been used as a store of value.
There were trading and barters done with it. While
physical gold is considered an asset to hold and
sit on for years. For storing many uses the method
of buying small coins, biscuits, or jewelry.
Do remember to check with local laws on
how much gold you can own.
Gold Bond
Other options have opened up in Gold bonds
backed by sovereign guarantees. There are
other papers tied to the asset that gives you a
fixed interest and pays you back the principal
at the end of tenure. This is considered significantly safe as there is a
Guarantee by the government and then there
is also another safety. Storage of gold is quite difficult,
considering the costs that are attached to storing
in the vaults, lockers, or other places. But, storing a
paper in a Demat account and holding it until the
tenure is over, you eliminate the risk of physical theft.
Also, there are other benefits like getting out of the
deal whenever you deem it fit. Unlike in the real world
where you will actually have to give up a significant
amount of money on the making charges and other
charges, there are no charges except for the
clearance and other standard charges on the debit of
your paper or bond from the Demat. You can use
so much power when you have the freedom of this
liability. Many even do swing trading out of this
technique and make a significant positive cash flow.
Exchange Traded Fund or ETF of Gold
The other option also is to fund your portfolio with
an Exchange Traded Fund or ETF of Gold.
What a Gold ETF does is it actually tracks the
movement of the underlying asset and gives you
a return like any other stock. The liquidity is
higher, though there should be some tracking
errors in this method. ETFs can be bought
daily or anytime you want to hedge your index
ETFs. Usually, when the market is down and
you are not making a significant return on
the portfolio, you could always try and take
advantage of the Gold ETFs.
Learn more about the margin trading
facility and the leverage trading options.
A downside of this ETF swing trading strategy
could be useful, but do not be overwhelmed
with the opportunity costs and the transaction
charges. There should be good due diligence
done on the part of the investor, study which
ETFs have performed better with better returns
over the same period when compared to their peers.
All things being said, I think it is important to
have an objective point of view of the
charts while we study for the purpose of
trading commodities. If you come across
a chart of Gold that directly correlates to,
it is perhaps not an exception. The Dollar
itself can be going through a valuation
revision and that might temporarily pull or
push the prices into awkward pockets.
Thanks for reading this far,
I think it's much simpler to
just consider the important levels;
like that of Support and Resistance
to find our Highs and Lows,
to deploy a trade!
No matter, however, you entire the
world of building your wealth with Gold,
the only thing you need to know is nothing
is constant. The performance of the
patterns may fail due to a ton of factors,
and you may never know why that happened
if you are not prepared. This article explained
how the relationships and correlations of gold
could differ over world events, month on month.
Do not do the mistake of taking any analysis
verbatim. Your profits and losses are yours,
the wisdom or experience can be learned
from the world and then implemented.
Use the knowledge to increase the horizon
of your investment, to grow over a longer
period, and with a balanced exposure to
various assets class. Three are ways
how you can take systematic risks and
eliminate the unwanted nonsense that
you are sold for personal help or financial
liberty courses. Certain things need
enlightenment, while some need good
knowledge and then there are things of
common sense.
Books like this may help you in this process.
For Habit Creation and stacking
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support the blog. Before investing please
do your own due diligence,
content is not investment advice.
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