Trading gold: Are all gold traders crazy?

Introduction

We all love a bit of gold trading, don’t we? Super shiny, coveted, and somehow still more reliable than your local internet connection! Whether you’re a newbie trader staring hopefully at your candlestick charts or a seasoned institutional trader with a sixth sense for next big market move, gold has its own unique appeal

It has been treasured for millennia—from ancient bronze-aged kings to your grandma’s vintage wedding ring—and still today, it glitters like a bright star in the night sky on the Forex markets.

But why bother trading gold, you might ask yourself? Well, aside from the obvious “it makes you a lot of money,” gold has a unique charm: it tends to hold value when the economy goes south, when interest rates do the tango, or when geopolitical events make headlines. In short, it’s the financial equivalent of a pacifier to a screaming baby!

In this article, we’ll take an informative, slightly quirky journey through gold’s trading history, examine how global events—like the recent wars in Ukraine and Gaza—shake-up the markets, and look at what factors that could drive the price of gold in the next 12 months. Along the way, we’ll weigh up the pros and cons of trading gold and look at the current market price. So, grab a cup of your best coffee, and let’s talk about the treasured shiny stuff.

The History of the Gold Price

Humans have been obsessed with gold for thousands of years—and its price history reads like a dramatic Hollywood movie. Back in 1971, when the U.S. decided to ditch the gold standard, gold prices began their crazy rollercoaster ride. In the 1980s, gold flirted with highs around $850 per troy ounce, giving early traders a reason to celebrate (or cry, depending on which direction they were trading).

Fast forward to the 2000s: the financial crisis of 2008 sent gold skyrocketing. Investors, fearing the collapse of central banks, flocked to the “safe haven” metal, and by 2011, gold hit an all-time high of around $1,900 per ounce. Some traders were swigging the Bollinger; others were quietly kicking themselves for selling too soon.

Of course, markets aren’t just about numbers, they’re about people. The COVID-19 pandemic, for example, saw gold prices climb again, hovering around $2,000 per ounce at times. Uncertainty drives demand, and gold loves uncertainty like a Dog loves a walk.

Looking back, the main lesson for trading gold is clear: gold has survived wars, crises, and even political shocks for the global economies. For traders, it’s both a safety net and a wild ride, sometimes soothing, sometimes thrilling, but always exciting.

Geopolitical Events and Gold (Ukraine & Gaza)

Gold is the world’s unofficial “financial panic button.” When global tensions flare, investors rush to it like it’s the last lifeboat on the Titanic. Two recent examples— the war in Ukraine and the conflict in Gaza have both shown exactly how geopolitical events can really shake-up gold prices.

The Ukraine war, starting in 2022, it triggered a rush toward gold as investors sought safety amid economic uncertainty and the threat of sanctions. The metal prices spiked, reflecting fear, uncertainty, and the classic “better be safe than sorry” mentality. Traders watching gold charts go up probably felt like they were on a runaway train with chance of it stopping.

Meanwhile, tensions in Gaza also sent ripples through the markets, though on a somewhat smaller scale. Even localized conflicts can create global uncertainty, and gold tends to benefit from these jitters. Essentially, gold doesn’t care about borders or people; it only cares about fear, uncertainty, mixed in with a dash of global chaos.

For traders, these events underscore a simple rule: geopolitical crises can move gold more than your average economic news release. And while you don’t want to hope for war just to make profit (“no, we seriously, don’t want this”), staying aware of global events is key to making informed trading decisions when trading gold.

Factors Driving the Gold Price

Gold doesn’t just move on a whim—it dances to a mix of economic, political, and even slightly dramatic influences. What are the main drivers?

• 1. FED Interest Rates and Inflation: When the US interest rates are low and inflation rises, gold becomes more attractive because it doesn’t pay interest but holds value. Think of it as a stubborn friend who refuses to lose weight despite all the chaos— it is reliable but all so resilient.
• 2. Geopolitical Tensions and Oil Prices: Wars and regional conflicts aren’t the only things that push gold upward. When oil-producing regions get tense, oil prices spike, inflation fears rise, and gold often follows. It’s like a domino effect: uncertainty in energy markets makes investors think, “Maybe I’ll stash some gold just in case.”. The recent Iran tensions are a perfect example of this.
• 3. Central Bank Purchases: Around the world, central banks have been snapping up gold faster than can be mined out of the ground. This increased demand reduces available supply and naturally pushes prices higher. Trader’s love watching the gold price go up because it’s like ringing a dinner bell to a pride of starving Lions
• 4. Supply & Demand Dynamics: New gold mines aren’t exactly popping up left, right and center overnight. With a limited supply coupled with rising demand; especially from investors and big banks, it keeps the gold price buoyant.
• 5. Investor Sentiment: Sometimes it’s just psychology. When fear spreads, gold becomes the “safe haven” everyone wants. When confidence surges, it might take a little nap in your portfolio.

In short, gold reacts to a mix of economic indicators, global uncertainty, and the age-old push-pull of supply and demand. Understanding these factors gives traders a map through the glittering—but sometimes unpredictable—gold market.



Advantages and Disadvantages of Trading Gold

Trading gold isn’t all rainbows and butterflies—it has its ups and downs. Here’s the lowdown for newbie and intermediate traders:

Advantages:

• 1. Safe Haven Asset: Gold often holds its value when other markets wobble. Think of it as a financial security blanket—just a bit shinier.
• 2. Liquidity: Gold can be bought and sold easily on Forex markets, making it accessible to traders with small or large accounts.
• 3. Diversification: Adding gold to your portfolio spreads risk; it’s like keeping both cookies and cake in your dessert stash, if one fails, the other hopefully saves the day.
• 4. Global Demand: From investors to central banks, demand is consistent, helping maintain its value over time.

Disadvantages:

• 1. No Yield: Unlike stocks or bonds, gold doesn’t pay dividends or interest—it just sits there, looking fabulous of course.
• 2. Price Volatility: Gold can swing sharply in response to geopolitical events or economic data, which can spook newbie traders.
• 3. Storage & Transaction Costs: Physical gold requires safekeeping, and even digital trading with swap fees can chip away at your profits.
• 4. Market Timing: Profiting from gold often depends on timing the market, which can feel like playing Whack-a Mole on steroids at times.

In short, trading gold offers excitement and security in equal measures but, it’s not a guaranteed winning ticket. You need to approach it with a robust strategy, a bit of humor, and maybe a box of tissues on hand, just in case.



What to look out for in the year ahead

There are a number of factors that are likely to impact the price of gold over the course of the following year:

• ● Central Bank Demand: Central banks, particularly in Asia, have been increasing their gold reserves, seeking to diversify away from the U.S. dollar.
• ● Geopolitical Tensions: Ongoing conflicts and economic uncertainties are likely to keep gold in demand as a top pocket safe-haven asset.
• ● Economic Factors: Potential economic slowdowns and inflation concerns may further bolster gold's appeal.

While certain assumptions can be made, it's important to note that gold prices can be volatile and unpredictable. Traders should stay informed about global economic and political developments that could impact the market.



Conclusion

Gold trading is a dazzling mix of history, economics, and a little bit of human psychology. From ancient civilizations hoarding the shiny stuff to modern traders navigating complex Forex charts, gold has maintained its allure—and of course, its value.

Geopolitical conflicts, central bank purchases, and even oil price shocks all add twists to the story, making gold a dynamic but sometimes unpredictable market.

With new exciting markets emerging such as the rise in digital currencies, Bitcoin and Ethereum for example, well, gold still has a top seat at the table and remain so for a very long time.

For traders, gold offers both security and excitement: a way to diversify portfolios, hedge against uncertainty, and maybe even enjoy a little thrill when the charts spike, or dip. Just remember, it can be a very volatile market and if you get it right, you will be on top of the world; get it wrong and, like most traders, you mark it down as a lesson well paid for!

In the end, gold remains the glittering asset in an ever-changing world. It may not pay you any dividends, but it sure knows how to make an entrance. So fellow trader, keep your wits about you, keep your eye peeled on global events, and let gold add a sparkle to your trading experience.

Disclaimer: The analysis provided is for informational and illustrative purposes only and should not be considered financial advice. The ideas shared are based on the guest author’s independent analysis and do not constitute investment recommendations or financial advice from Radex Markets.

Radex Markets cannot guarantee, and assumes no legal liability or responsibility for, the relevance, accuracy, currency or completeness of the information. All decisions to trade in financial markets involve risk, and it is the client's responsibility to assess their financial situation, level of experience, and risk tolerance before trading.