Gold options are options contracts that utilize either physical gold or gold futures as their underlying instrument.Call options on gold give the contract holder the right to buy the metal at a pre-set price before it expires, and put options the right to sell.Gold options trading in the U.S. are listed on the CME COMEX and use gold futures (which in turn represent 100 troy oz. of gold) as its underlying asset.Check with your broker to see if you have access to these markets through their platform.
You can use options to profit whether gold prices rise or fall - or even stays the same. Believe the price of gold will rise? Buy a gold call option. A call option gives the right, but not the obligation, to buy gold at a specific price for a certain amount of time (expiry). The price you can buy gold at is called the strike price. If the price of gold rises above your strike price before the option expires, you make a profit. If the price of gold is below your strike price at expiry, you lose what you paid for the option, called the premium.
Gold has a strong negative correlation with US Dollar and a strong positive correlation with the Stock market.
A negative correlation means that both the commodity moves in opposite direction. It is observed that strong US Dollar put pressure on crude oil and it falls. Conversely, the lower Dollar value helps and support the surge in oil price.
The gold is also positively correlated to the stock market. A growing economy and the positive trend in stock market supports the higher oil prices.
However, a trader needs to be cautious because if gold price moves high, it can slow down the economy. At this point, the stock market and oil price tend to move in the opposite direction.
Gold is one of the favourite markets for the day traders and it provide ample opportunities to make consistent profit in the commodity market.
The Gold market reacts pretty well to the pivot points and also to the support and resistance level.
Traders should never try to trade without stop loss as the commodity tends to make soft runs at any given point in time.
The demand and supply of the commodity is the prime factor that leads to the movement in the commodity market. The movement in the price of the Gold also gets affected by the global output and the economic prosperity globally.
Oversupply of the commodity and its thin demand urges the traders to sell the commodity and push the crude oil to the lower ground.
Increase in demand with flat production creates the bull market for the gold, and it encourages the traders to bid, and there is a positive uptrend in the market.
When the positive elements converge, the powerful uptrend emerges. Similarly, the convergence of the negative elements creates the equally powerful downtrend.
So the traders should be able to judge the market and read the trend before taking positions to make a profit in the market.
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