Gold Bullion Trading this Week

Yesterday, the price of gold bullion rose to $1,351.36 per ounce ($43,441.77 per kg). Bullion is the preferred safe-haven asset of investors when markets are racked by geopolitical uncertainty and high levels of volatility. The day’s gains were 1.05%, but it’s the performance over time that is most impressive. Gold has generated gains of 7.79% over 30 days and 24.33% over 6 months. The 1-year performance of bullion has outperformed many commodities with gains of 14.94%. Extrapolating the data further back, it is clear that gold bullion has shed 9.82% over the past 5 years but it has gained 361.33% over the past 16 years.

Precious metals overall are experiencing a bull run given the extreme volatility in markets at this time. Assuming that this pattern continues, we may well see a point where gold reaches the $2000 level and then enters a parabolic state. While this may simply be nothing more than conjecture at this time, prices tend to accelerate in parabolic price curves.

It may rise from $1,500 per ounce to $3,000 per ounce in next to no time at all, however this is all dependent on myriad factors coming into play. Nonetheless, the precious metals rally is likely to continue well into the next couple of years given the uncertainty related to general elections, the Brexit referendum and the fallout, terrorism, natural disasters and the like.

Trading Gold: Buying and Selling at the Right Time

As the world’s favorite safe-haven asset, gold is the go-to investment option during times of extreme anxiety. Fortunately, there is regulation of the gold market and it comes in the form of futures contracts. These have maximum limits designed to ensure that contract prices are not dragged too low or pulled up too high during times of excessive volatility. A good example of these thresholds is evident in the price of silver which has a daily limit price rise or fall of $30. If the price moves more than that in a single day, a halt to all silver futures trading will take place.

One of the more difficult aspects of dabbling in gold is when to buy and when to sell. The volatility is such that prices hit extreme levels and move in unexpected directions. It may well occur that the price of gold is inching towards a target level that you have set, and is followed by a steep price plunge. What typically happens in this scenario is that traders sell the commodity en masse thinking that they missed the high price, only to be rudely awakened by a price reversal.

Uncertainty Looms Large

Many times, novice traders will feel that they have missed the boat and jump back in even at a higher price hoping that the price reversal will continue on its upward trajectory. This may or may not be the case, but it does not bode well as an effective trading strategy. Most every trader who has gone through the motions understands precisely what all of this entails. Speculative behavior is largely responsible for the declines and increases in the price of commodities like gold.

Currencies rise and fall relative to one another, and economies do likewise. In today’s world where social media reigns supreme, rumors can generate panic selling or result in a buying frenzy. What is clear though is that uncertain times provide the perfect breeding ground for precious metals like gold and that’s precisely what we are seeing right now.