Investing In Gold: Trading Spot Gold vs Buy and Hold

by The Smarter Wallet on June 27, 2009

As part of our coverage of various investment markets, we take a look at how recent spot gold prices are behaving. Over the last 10 years, gold prices have been climbing steadily, and have been experiencing a general upward trend, interrupted somewhat by the volatility experienced during 2008. Here is what gold looks like over the previous 10 years.

Gold 10 Year Chart

While here is how the gold chart looks like over the last 5 years.

Gold 5 Year Chart

Long Term Investing In Gold

If you are a long term investor who has taken the passive investing approach, then you probably already have a diversified asset allocation with some gold representation in your portfolio. Investment experts often recommend that we buy gold (or precious metals) as a way to hedge the rest of our investment portfolio, which would normally contain other asset classes such as stocks, bonds, cash and maybe even REITs, or commodities.

So how much of your funds should you put into gold, assuming that you want to invest for the long term? It depends on how you feel about the current investing environment and the economy. Do you feel nervous about the future? Do you think the dollar will crash or inflation will rise? If so, then perhaps gold should carry a little more weight in your overall allocation. A reasonable gold or precious metals allocation may be around 5% of your total investment funds.

Trading Spot Gold (XAUUSDO)

Now for those who prefer to trade gold instead, following is an interesting video by which demonstrates the use of their MarketClub trading tool. Their charting tool analyzes the short term behavior of gold and tries to forecast where gold prices are headed.

Click on this link or the image below to watch the video.

Trade Spot Gold

If you’ve seen’s videos before, then you’ll be familiar with the trend lines in use here as well as a variety of trading indicators (such as INO’s proprietary trade triangles) that are used to interpret market price charts. In particular, the indicators are used to determine whether you should go long or short on gold prices. The narrator, Adam Hewison, also points out how to use the MarketClub tool’s Fibonacci Rule feature to express the possibility of a further drop in recent gold prices from higher levels in the last month. While other indicators show that gold has been heavily oversold over the last week, they also suggest that the market will remain in a trading range.

Investing and Trading Tools and Resources

We’ve shown you how you can trade gold by using INO’s MarketClub tool, but there’s more you can learn through both online and traditional investment resources.

Free Trading Tools and Resources. To learn how to trade stocks by using stock technical analysis or to find out how to invest in a variety of other markets, you can start by checking out’s free resources such as the free Trend Analysis tool and their free investing/trading videos. If you want to get your feet wet with stock trading, you can also sign up with a free fantasy stock trading game site such as Wall Street Survivor where you won’t risk any of your real money while trading; they start you off with $100,000 in virtual cash which you “play” with in a simulated trading environment. What more, they also offer cash prizes!

Premium Trading Tools and Resources. For more sophisticated tools, you can also take a look at the MarketClub trading tool which was used in the video above, or INO’s premium investing/trading video channel: both are available as paid subscriptions. For your continued investment education, you can check out Morningstar, Investor’s Business Daily and of course, the Wall Street Journal, where you can get a ton of investment information.

To get an idea of how traders are analyzing our current market environment, please visit the following articles. You’ll also find other videos here:

Don’t forget that trading and investing involve discipline, diversification and analysis!

Images by Kitco.

If you enjoyed this post, you can get free regular updates through our RSS Feed, or you can have our latest posts delivered to your email inbox by supplying your address here. Your address will only be used for this purpose, and you can unsubscribe anytime.

{ 1 comment… read it below or add one }

1 Joe July 8, 2009 at 12:20 am

Very informative post – and links. Thanks for sharing them.

Leave a Comment