There are four major factors to consider whilst entering trading in the gold market.
Real Yields
These are bonds minus inflation. Falling yields are good for gold. Inflation fading means yields are likely to rise and normally in tandem with the USD.
See USD as the next point.
USD
Although it is not a proven fact, but there is an inverse correlation between the USD and gold prices as they tend to move in the opposite direction. The Federal Reserve policy plays a big role in effecting the USD interest rate. Rising interest rates are positive for the dollar and negative for gold price. This is why gold is considered a safe haven asset and a natural hedge against USD denominated assets.
Seasonal Demand
Gold consumption increases during festivals such as the Chinese New Year, India's Diwali and wedding season, Christmas, New Year and Valentine's Day. Most gold in the form of small bars and jewellery is purchased between September and February, which also means this is the wrong time to invest in the yellow metal. Off season will provide better pricing.
Exchange Traded Funds (ETFs)
ETFs is a share value that tracks the price of gold. It is a popular financial instrument that provides exposure to the gold price without the need for owning physical gold. When ETF volumes rise, so does the gold price and vice versa.
Conclusion
If you are mindful of these factors, you would not enter the gold market for trading at the wrong time. Invest wisely and efficiently.
