Gold is probably the most established money on the planet and therefore, it has become a significant aspect of the monetary world. It is considered valuable in the psychology of individuals and considered property by almost everyone.
Gold is a very useful item which is mainly used as jewellery and has other industrial applications like electronics such as mobile phones, GPS systems, televisions etc. and industries like glass making, medical treatment and dentistry Are also.
The largest gold producing countries are China, Australia, Canada, Indonesia and one of the largest consumers of gold, with an annual consumption of around 700 tonnes annually.Because of these variables, gold turns into a critical product in India.
Earlier, gold was traded only in physical form, however, with the advent of technology, commodity trading of gold was also extended to gold-based exchange traded funds (ETFs) and equity-based gold funds. is.
Gold commodity trading has its own contract specifications, margin requirements, risks and rewards. Like other forms of commodity trading, commodity trading of gold is strongly influenced by the demand and supply of gold. Due to worldwide usage and worldwide acceptance of gold consumption and as a financial instrument, gold prices are influenced by many macroeconomic and political factors.
Gold is considered a safe haven and protection against any form of economic recession. Gold’s product exchanging market is exceptionally fluid and gainful because of its special attributes. A fruitful gold item dealer needs to comprehend these interesting highlights so as to exchange productively in gold.
Gold commodity trading in India is mostly in the form of multi-commodity exchanges (MCX) such as commodity exchanges and various types of contracts. Some of the different types of gold contracts which vary based on lot size, tick size, expiration date and profit and loss per tick are as follows:
Gold (The Big Gold):
Gold contracts have the most traded and most liquid “big gold”. The minimum lot size for this contract is 1 kg and the profit and loss per tick is ₹ 100. Although the margin requirement is around 4%, the value in rupees is quite high and is suitable only for large level investors and not much for retail traders.
Gold:
Gold contracts have the most traded and most liquid “big gold”. The minimum lot size for this contract is 1 kg and the profit and loss per tick is ₹ 100. Although the margin requirement is around 4%, the value in rupees is quite high and is suitable only for large level investors and not much for retail traders.
The termination contract is the 5th day of the month.
Gold Mini:
Due to high margin requirements, the Big Gold contract is not quite suitable for retail investors. For them, the Gold Mini is more reasonable as a size over 100 and the gain and loss per tick is only ₹ 10.
Gold Guinea:
Similarly, Gold Guinea has a very small size of 8 GM and the profit and loss per tick is ₹ 1.
Gold Petal:
The base parcel size for a Gold Petal contract is just 1 gram and the benefit and misfortune per tick is ₹ 1.
Although the margin requirement for light contracts in commodity trading of gold is very low, liquidity and volume are also decreasing. Therefore, for heavy gold contracts and more liquidity, it is better to trade in the nearest expiry date.
For a gold commodity trader, it is important to understand how the gold market moves, the factors affecting demand and supply and gold prices, sentiment for gold, fundamental and technical analysis methods and when and how much to invest is.
These basics are very important to understand so that traders are able to make good financial decisions and earn profits while reducing losses.
Basic factors to consider before gold commodity trading
When investing or trading in the gold commodity segment, you should consider some basic factors:
Factors Affecting The Price of Gold:
For gold to be beneficial in ware exchanging, the initial step for a merchant is to comprehend the elements of gold. It is important to understand that gold is a commodity that is affected by many global factors such as inflation and deflation, greed and fear and overall supply and demand.
For instance, when inflation hits the economy, stocks begin to fall and at the same time attract investors to buy gold as a safety net. Several factors combine in world markets to influence gold prices. Gold prices are also affected by dollar prices.
Investors’ thinking and their impact on gold commodity trading:
For commodity trading of gold, traders must understand crowd sentiments very well. There are people in the economy who buy physical gold for ownership purposes and many others who use gold as a hedging mechanism along with currencies and other instruments to manage their risks.
In such cases, Gold’s funds become important because they create a basket of instruments that match the risks and rewards.
Technical Analysis for Gold Business:
Gold item exchanging is particularly about major investigation, that is, taking a gander at the effect of economy, legislative issues, industrialisation and so forth. on the price of gold. Also, commodity trading of gold includes long-term technical analysis through charts and other techniques.
Long term trend analysis helps traders identify the price levels that need to be observed.
To choose:
After considering all the above factors, the trader must decide whether the gold commodity trade is in line with its needs, objectives and goals. Once this is done, the exchange should be decided as discussed above and then finally decide the type of gold contract.
Gold commodity trading is a rewarding and modern avenue for financial investment.
It is based on the same premises as physical trading with additional benefits and knowledge of modern technology. Like all other forms of business, it involves its level of risk that needs to be well managed with knowledge, experience and practice to ensure that capital remains protected and has a good amount of profit.
If you want to invest in Gold or Commodity segment or even in other segments like Equity, Currency, Mutual Funds – just fill some basic details in the form below.
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Founder & CEO| Fox Investor – Financial Blog Portal & A.V.A. Taxway Associates- Corporate & Tax Law Firm
Dr. Vibhor S Agarwal has a Ph.D. in IPR, start-ups, and corporate law, as well as an MBA in finance from NMIMS Mumbai, and achieved numerous certifications in corporate law. He is a practicing corporate lawyer and the founder of two business verticals. He has advised over 2000 businesses, 5000 students, and 400 new start-ups all over India and other countries like Dubai, London, the USA, and Qatar. Dr. Viibhor Agarwal assists people with business expansion and branding, regardless of size, as well as business setup, financial literacy, start-up guidance, licensing, tax planning, and other legal compliance issues. Dr. Viibhor Agarwal’s goal is to provide complete financial and business literacy to all businessmen who want to start new businesses and grow existing businesses and to those students who want to open their start-ups. In each video, Dr. Viibhor Agarwal not only explains the method of the solution but also advises subscribers on practical tips learned from and faced by clients handled by Dr. Viibhor Agarwal daily. This blog portal provides you with an easy and clear solution to your business problem, allowing you to take your business to the next level.
