In this educational article, we will discuss top 5 important and high impact news for trading Gold.
All the types of the news that we will discuss are essential for scalping, day trading, swing trading and investing in Gold, because it may move Gold prices heavily from short term and long term perspectives.
1. Catastrophes
Catastrophes have a huge impact on Gold prices for several reasons:
It is unpredictable, it makes people make emotional decisions that are usually driven by fear, and its outcome is hard to predict.
By catastrophes, I mean natural disasters, pandemics, man-made disasters (e.g., terrorist attacks) and technological disasters like nuclear accidents.
Catastrophes make investors invest heavily in Gold, pushing its prices up sharply, much above its fair value.
Look what happened with Gold prices after governments started to implement lockdowns because of Covid in March 2020.
2. Wars
Wars create uncertainty and increase the risks in financial markets, making investors to rebalance their portfolios from more volatile and riskier assets like stocks towards safe-haven assets.
Gold is widely considered a safe-heaven asset that historically keeps its value or even increasing in times of uncertainties.
When Hamas unexpectedly attacked Israel and the war started, Gold reversed and a strong bullish rally initiated.
3. Uncertainty
Remember that the uncertainty may arise even without war.
The geopolitical tensions, increased government spending, political instability may dramatically affect Gold prices.
Even though the war in Ukraine started 24th of February. Because of the uncertainty and escalation in Russian/US relations, bullish rally started earlier.
4. US Dollar
Remember that Gold is valued in US Dollar. Changes in its value may have inverse relationship with Gold prices.
Above there are 2 charts: on the left, Dollar Index chart on a daily time frame, on the right, Gold price chart on a daily time frame.
We can see an obvious negative correlation between US Dollar and Gold.
5. Fundamental News in the Economic Calendar
Because Gold and US Dollar are inversely correlated, US fundamental news has significant impact on Gold prices.
In the economic calendar, filter US news and choose the most important ones.
The release of this news may trigger significant movements on the market.
Look how Gold reacted to a release of US Initial Jobless Claims and Manufacturing Index data. Being relatively flat before the news, the market turned bearish after the release.
The understanding what drives Gold prices is essential for profitable trading and investing in Gold.
Even if you are a pure technician, you should pay attention to this news, because it can easily invalidate even the best technical setup.
