Smartest investment and life plans in UAE

Tips on Trading Gold in the UAE

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  | Published: 17 January 2020 | Last Updated On: 08 February 2021

Invest in GOLD and give a boost to your investment portfolio

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Investment in Dubai

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Smartest investment and life plans in UAE

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Why is Trading Gold Popular?

Since ancient times, gold has been the most preferred of the world’s precious metals, sought-after for both its financial and cultural value. Trading gold has gained popularity as a form of insurance because it is considered a safe bet in times of financial troubles.

Reasons for Trading Gold

The main reasons for trading gold are:

Hedge against Inflation

Gold is a feasible way to hedge against any weaknesses in the larger economies across the globe. This economic weakness is likely to spread and the central banks are likely to react by lowering the interest rates and increasing the money supply. When it reaches the point where these remedies are not able to spur demand, they can cause significant inflation and loss of purchasing power. Unlike paper currencies, gold tends to maintain its purchasing power in case of inflation.

Hedge against Global Instability

Generally, gold performs well during the period of global crises. Gold in general benefits when the other assets are falling during turbulent times.

Key to Diversification

The key to diversification is to spread risk across different uncorrelated securities. Many investors in Dubai and other parts of the world view gold as a source to balance the investments in their portfolios. Over the past, gold has proved to have a lower correlation to several asset classes, which is what makes it an attractive instrument for diversification in the eyes of the investors in Dubai.

Tips for Trading Gold

Here are the top tips that will help you prepare for trading gold:

Plan Your Trade

Gold tends to provoke strong emotions in investors in Dubai, which leads them to place too much on one single trade or on a losing position. As an investor, you should throw this thought out of your mind and think of the commodity in terms of the changes in its price. You should have a trading plan that is based on a risk-reward ratio, and you should at all times stick to this plan.

Analyze the Market

You should obtain a chart that depicts the movement of gold over time, and look for patterns, wait for breakouts, and invest with the trend.

Learn the Factors that Impact Gold’s Movement

Even though gold does not move as aggressively as other markets when it comes to being affected by political and economic events, it does have its own factors that tend to drive the gold price in UAE and other parts of the world. It is important to keep a lookout for these factors while trading. You can read about these further in the thread.

Consider Gold ETFs

You can consider investing in a Gold ETF i.e., Exchange Traded Fund to deliver results against this precious metal’s price movements. You can also consider these to gain exposure in more than the price of bullion.

Factors Influencing the Gold Price in UAE

The following factors drive the gold price in UAE and other parts across the globe:

Gold Demand

The gold price in UAE is likely to increase with an increase in its demand. All because of the financial and cultural value that gold holds, the value it holds across the globe, and its use in different industries from jewelry to technology, the amount of gold bought annually has been increasing at a fast pace.

The US Dollar

The US dollar and gold hold a complicated, but an inverse relationship. When the dollar is falling, the investors in Dubai look for an alternative store of value and turn to buy gold, which drives up its price. And when the dollar is falling, it increases the value of other currencies, and this greater buying power also tends to increase the demand for gold that was previously considered unaffordable.

Financial and Political Factors

Gold tends to retain its value, which makes it an attractive investment in financial and political stressful times. Gold has become a popular mechanism for investment considering the uncertainties faced by the world economy.

Central Bank

Interest rates are another factor that influences the price movements of gold. interest rates and gold usually hold an inverse relationship. The scenario of low-interest rates is often seemed to be positive for gold.

Inflation

The interest rates and inflation are related closely. A rise in general prices tends to increase in interest rates. Gold has proved to perform well during situations of high inflation and deflation where the financial stress sharply rises.

To Further Conclude

There are many reasons why investors in Dubai wish to trade in gold, from the diversity of your portfolio to a hedge against a stressful economy, there are several benefits of including this precious metal in your investment portfolio. However, it is important to be well aware of the factors that affect the gold price in UAE before you move forward with your gold investment.