Should Gold Be Part Of Your Daily Trading Regimen?

Gold Price Dragged Lower in Choppy Trading Sessions

The current gold price is $1,248.19 per ounce. This is sharply lower than the price of the precious metal on Tuesday, 4 April when it was trading at $1,259.43 per ounce. It is interesting to point out that despite the tremendous volatility in gold markets, the total return of gold in USD since 2002 is 350.9%. The average annual return is 11% – remarkable for an asset that has traded alongside a bullish Wall Street in recent years. It should be noted that the performance of gold was abysmal in 2013 (-28.3%), 2014 (-1.5%) and in 2015 (-10.4%).

Modest gains in 2016 of 8.5% belie the tremendous rally that took place in the first half of the year where gold was the leading commodity with gains of 20% +. For 2017 to date, gold has averaged a 9.1% return, but it’s still early days. As a binary options trader, the net bullish sentiment for gold is the clearest such indicator that call options are the order of the day. But, what short-term economic data will affect the gold price and how will this impact trading decisions?

Looking to the Indicators for Binary Options Gold Traders

Gold prices are affected by multiple factors, but the Federal Reserve Bank’s decisions are the most important. When the Fed raises interest rates, as it recently did, demand for the USD increases. Since gold is priced in dollars, the demand for gold decreases with a rate hike. Other factors that influence gold prices include currency movements with the EUR, USD and GBP, sales of exchange traded funds, inflation figures, demand/supply data and global economic uncertainty.

The rule is as follows: When investors and traders are risk-averse in equities markets, capital typically flows elsewhere – to gold and treasuries. Binary options gold traders should carefully gauge the financial markets for clues about risk-on, or risk-off sentiment to equities. In 2016, gold began trading at $1,060.80 per ounce; today it has appreciated by approximately $188 per ounce. The reason gold fares poorly in an era of rising interest rates is that there is an opportunity cost of holding gold: the interest that is foregone on investing elsewhere.