Understanding gold quotation on the stock market :
First and foremost, before embarking on a more in-depth analysis of the live gold price, you must of course understand how gold is listed on the stock exchange and what determines its price on the market.
Like all assets listed on the financial markets, the price of gold is determined solely by the mechanism of supply and demand on the world market for this commodity. Indeed, in this market, orders to buy and sell gold are constantly being placed and it is these orders that define supply and demand.
Thus, strong demand and weak supply will cause the price of an ounce of gold to rise while weak demand and strong supply will cause it to fall.
It is also important here to understand what the gold fixing quotation is. It is in fact a daily procedure that defines the reference price of gold by comparing supply and demand for this commodity, so that the maximum number of transactions can be carried out. This is done by taking into account the buyers and sellers and the size of their orders. Fixing quotation therefore provides a clear measure of the supply and demand for gold on the global but centralised market.
Graphical and technical analysis of the gold price live :
The first analysis you need to set up to study the gold price is of course the graphical analysis which is a mandatory prerequisite for any self-respecting trader. To do this, you need to have a real time chart that shows the gold price and its evolution in real time.
Gold is indeed a particularly volatile asset and its fluctuations can sometimes be strong and rapid. This of course represents an undeniable risk for investors who must be able to identify markets that are too volatile and therefore too risky.
But technical analysis is not only used to identify the level of volatility of gold and will also be used to try to identify trends over the longer term. As you can imagine, analyzing the price of gold using graphs requires a certain amount of knowledge, including a good understanding of the most popular technical indicators and the ability to interpret and relate them. Again, the choice of graph you use will be of utmost importance. The more indicators you can display and customize in the graph, the more likely you are to be able to perform a complete and relevant technical analysis.
Without going into the details of this technical analysis at this point, please note that the most frequently used technical indicators in the analysis of the live gold price include technical support and resistance levels, the MACD indicator, moving averages and pivot points.
Carry out a technical analysis of the gold price in detail :
When analysing the price of gold live, you should therefore first and foremost master technical analysis in order to have an idea of the trend of this asset on the market. But as we have seen above, defining a market trend is a complex exercise that requires a good command of technical indicators and graphical figures. The detection of a strong and sustained trend is usually the basis for traders' buying or selling positions or the closing point of previously open positions.
Thus, gold stock charts are used to determine the trend in which this asset is currently located and for how long, but also to best anticipate the future trend by identifying an acceleration of the current trend or, on the contrary, a risk of a reversal of the current trend. Three main types of trends can be distinguished graphically:
- Bullish Trend: As its name suggests, a bullish trend is a trend in which the price of gold rises. The graph then shows an upward curve. This type of trend can of course vary in strength and duration.
- Horizontal trend or neutral trend: This is a trend observed in the least volatile markets. It is a trend observed in the least volatile markets, where the curve is stagnant near a given level with little variation. Horizontal trends are most often observed during the weekend or when few investors are interested in the market. Since it does not indicate a rise or fall in the price of gold, the neutral trend is often little used by traders when taking positions.
- The Bearish Trend: Finally, the third type of trend that you can observe on gold stock charts is the bearish trend which of course indicates that the price of gold is moving downwards. Graphically, we then observe a fairly sharp downward curve that can also be of varying strength or duration.
Of course, the basic rules of trading are that it is better to take a buy position at the beginning of an uptrend and a sell position at the beginning of a downtrend. But it is not as simple as that. Once you've spotted a trend, you also need to make sure that the trend is likely to last over time or, conversely, is likely to turn the other way. To do this, many investors base their analysis on the study of pivotal points which are important psychological thresholds and which may lead to a continuation or a reversal of the current trend. The same applies to levels of support and technical resistance.
But that's not all! Indeed, an important economic news or an event directly or indirectly affecting the gold market can also lead to a reversal or an acceleration of the trend. This is why technical analysis should never be used on its own but always in addition to a fundamental analysis of the gold price.
Perform a fundamental analysis of the gold price live :
While technical analysis is based solely on the study of live gold price charts, fundamental analysis will focus on external factors and events that may have an influence on the value of gold. As we have just explained, fundamental analysis systematically complements technical analysis in order to establish a coherent strategy that takes into account all aspects of gold quotation.
It is therefore a question of knowing, identifying and interpreting the factors that influence the price of gold at the time of purchase or sale, in other words, the elements that will impact the supply or demand for gold throughout the world.
For this, it is recommended to use an economic calendar in particular. This tool is often provided by brokers or available on the most popular stock exchange sites and allows you to view both recently published and forthcoming economic data. In this way, you have the possibility to spot the figures that may influence gold in the more or less long term.
As is the case with technical analysis, mastery of fundamental analysis is essential for any anticipation of gold price trends and requires both a solid knowledge of how the market works and a good understanding of how the market reacts to these announcements. Indeed, when you follow an announcement that is likely to have an influence on the price of gold, you must also take into account the most likely expectations of investors. After all, once the news is published, the market may have already anticipated it and the gold price may have already changed. It is then necessary to understand whether or not the market has reacted consistently with the validation of this data.
What are the elements to watch out for in a fundamental analysis of the gold price?
We now propose to go into a little more detail regarding the gold price and its fundamental analysis. As we have just seen, this analysis requires taking into account the events and news most likely to have an influence on the price of this raw material. To help you do this, we have provided some examples of data that you can incorporate into this analysis.
For example, the value of the U.S. dollar in the foreign exchange market will be monitored. Indeed, and although the US dollar rate is currently no longer really correlated with the price of gold, a significant strength or weakness of this currency can have an indirect impact on the evolution of demand. Indeed, it is known that gold, like many other commodities, is quoted in US dollars. As a result, the exchange rate of the dollar against other currencies will have an influence on the interest of buyers for this raw material. A strong dollar will therefore not offer an attractive exchange rate for foreign buyers wishing to invest in gold and will therefore tend to reduce demand. Conversely, a weak dollar against other major Forex currencies may make the purchase of gold more attractive and thus increase demand, which will have the effect of supporting prices.
Another common consideration when conducting fundamental analysis of the gold price is the economic health and growth of other markets. Indeed, it should be remembered that gold is still considered a safe haven today. This means that investors who have positions in other financial markets such as equities or currencies tend to switch to gold in the event of a crisis and a significant decline in these markets. In fact, looking at historical gold prices, gold tends to gain more points during major economic downturns. This is due to the fact that gold is considered a more stable investment over time than other assets. However, be careful to take into account another phenomenon, namely strategic profit taking, which can, when the gold price has gained a lot of points, lead to a rapid bearish turnaround. This is called a "bursting of the financial bubble".
Finally, a third example that we can cite regarding the price of gold and its fundamental analysis concerns the activity of importing countries. Of course, all countries in the world import gold, but some more than others. This is particularly the case for India or the developing countries known as "emerging markets". Generally speaking, strong economic growth in these countries tends to increase their demand for gold and vice versa.
Of course, the elements we have just discussed are only examples of the factors that can influence the price of gold. With further research and by looking at the various methods developed by the most experienced investors, you will discover other factors that can influence the price of this commodity that you can incorporate into your fundamental analysis.
Finally, let us recall once again that fundamental analysis should not be used on its own, but should be used systematically in addition to the technical analysis of this value.