Gold as a Safe Investment


In markets, especially Forex, things gain value when both currencies or CFD’s are compared in value with other items.

Why Gold is considered a precious yellow metal?

Metals such as Gold were widely used in the monetary system as a unit of money. When the Federal Reserve was created, the American people were using a piece of gold in every paper money printed.

In order to monopolize the market FED decided to print paper money without gold. When there was a significant contraction of Gold in circulation, the USA experienced a grave depression in 1929. Coincidence? We don’t think so! But let’s try to focuse on how to trade XAU these days.

XAUUSD was traded initially at US$19,39. That is, buyers could be owners of one troy ounce of Gold with the value of US$19,39.

Note that it’s normal to see Gold prices rising in wartime. Coincidence again? Absolutely not! During the War of 1812 the yellow metal was traded at a much higher price.

During World War I, the U.S Government settled on the Gold value of 4,45 per ounce.

In the 1970s, the American monetary system deprived Gold of a money representation status, which made the USD currency weaker.

Today, one ounce is equal to 1 oz = US$1324.00, approximately.

Nothing had so much influence on the metal investment like the USD.

So, if you are a day trader, consider 1D charts.

In 2012, FED applied a series of monetary easing to stimulate the economy.

Due to the increasing money supply in the market, the USD depreciated against Gold.

Certainly, if QE tapering happens, Gold prices will rise making Hedge funds satisfied.

Do you see the segment AB?

Hopefully, you will watch out a rising move.

When you see CCI above 0, be sure that bulls are stepping up. And vice verse.

Before detecting a breakout, check if Stoch or CCI is undervalued. Naturally, when indicators are pointing to the SAME thing, the direction seems solid.

It’s no secret how to detect breakouts. Just look at the 1-2-3 pattern or ABCD harmonic. If the third wave (CD) is larger than (AB) so, a resistance line is broken given uptrend continuation. Keep it in mind.

Look at H1 chart:

MACD demonstrated a slow movement after noticing a big move in the US session.

This ranging is attributed to the fact that traders din’t know what direction to follow. In this case, a bull breakout was forced by economic news about not to taper monetary stimulus.

Do you see a Bullish divergence where MACD > 0? The probability of going long increases in the beginning on the US session where blue candles are making a reversal.

The day after a breakout occurred a small ranging followed and again sellers decided to step up. This happened due to the CCI < 0 (bearish divergence) and MACD < 0 (bearish divergence). In other words, the new strength moved down.

On M5 chart, CCI also demonstrates bullish divergence. SMA is telling you green candle crossed the line. The probability that price will continue going up is higher.

Let’s draw some parallels with physics. The first Newton’s law says that: “an object either is at rest or moves at a constant velocity, unless acted upon by an external force.”

Ok, and what?

Well, in economy when prices drop, the probability to wait a further decrease is higher because the strength is an “inertial reference”!

Looking at M5 chart, before (X) the old trend was bearish. An inertial down wave.

Now, looking (X)-(A)-(B), the wave (XA) is showing you a stronger bullish reversal and the probability of a bull breakout is higher (again).

Furthermore, the gartley (XAB)-(BCD) was bullish.

Summing-up, try to check if CCI and MACD tell the same thing. Look if there is an ABC pattern or even a beautiful gartley before entering a trade. If the ABC pattern follows the same trend, a breakout will happen sooner or later.

The article is written by Igor Titara and is participating in the Forex Article Contest. Good luck!

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Forex Article Contest

The winner's trading horror story Halloween Story Contest. Join now! How do I Catch Big Trends? My Method of Objective Trading Bollinger Bands on 4H chart Interview with Forex Article Contest Winner – CryptoTrading

Latest articles


TSLA Shares Revive After Shareholder Meeting

Last week, Tesla held a shareholder meeting where the main events included:
→ Shareholders approving Elon Musk’s $56 billion compensation package in TSLA stock options;
→ Relocating the company’s legal headquarters to Texas;
→ Elon Musk’s statements on robotics, asserting

What Is a Petrodollar and How Does It Affect the Global Economy?
Trader’s Tools

What Is a Petrodollar and How Does It Affect the Global Economy?

The concept of petrodollars is an insightful topic to study. The petrodollar isn’t a specific currency but a financial system that reflects economic and political forces that have shaped international relations for decades. This concept is critical to understanding


Nasdaq 100 Index Reaches 20,000 Points for the First Time

On 30 May, we noted some uncertainty in the price behaviour of the Nasdaq 100 (US Tech 100 mini on FXOpen) near the resistance level of 18,840, as shown by arrow #1.

Following this, the price declined and tested

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.