Understanding Historic Gold Price Charts
Understanding historic fluctuations in the gold spot price provides vital insights into the market and helps us make informed investments. The patterns and trends teach valuable lessons about market dynamics and economic trends.
This may not translate into an ability to anticipate future prices but by utilizing knowledge of the market, an investor should be better able to buy gold at the right time.
Identifying Support and Resistance Levels
Support and resistance levels are indicators that some investors use to determine the right time to buy and sell gold. These will look like levels that compress the high and low prices of gold on a chart and they are subject to change.
Support and resistance levels are calculated by examining the peaks and valleys of the spot price. Marking the highs and lows over a given timeline and consider the trajectory of the slope that connects the highs and the slope that connects the lows.
It is not an exact science but can be used like a financial weathervane that warns of changing winds and trends. Identifying these trends may help target optimal entry and exit points to the gold market.
A pitfall to avoid is buying and selling too close to the chart lines. Some advisors recommend applying a 3% tolerance to these lines.
Support Levels
Support levels are points that indicate the emergence of buying interests that slow the falling price and begin exerting an upward force on the price of gold. This floor of the chart supports the price and indicates its lowest points.
Resistance Levels
Resistance levels are points that indicate the slowing of purchasing interests which temporarily end the upward trajectory of gold’s price and signal a forthcoming dip. Think of the resistance level as a ceiling that keeps the price from exceeding a given point.
When resistance lines are broken by a substantial margin, some investors suggest this has the potential to become a new support line.
Tracking Moving Averages
Moving averages are a representation of the weighted average of the gold price over time. Tracking the trends of the average helps to smooth out price data by considering changes in the average over a given period, which illustrates trends and potential reversal points. It can be used for long-term and short-term investing based on the frequency or rate of time that the average calculates.
Tracking the moving average can be used to systematically identify broad resistance and support lines, illustrating market trends over time. When the short-term moving average surpasses the long-term moving average, it signals a bullish trend. Inversely, when the short-term moving average dips below the long-term moving average, it indicates a bearish trend.
Gold-to-Silver Ratio
The gold-to-silver ratio represents the relationship between the prices of gold and silver. It is found by dividing the price of gold by the price of silver and expresses the number of silver ounces it requires to buy one ounce of gold.
The ratio helps investors assess relative positions of gold and silver: When the ratio is high, some investors choose to divest in gold and buy silver in hopes of capitalizing on movements within the market. This ratio has been tracked for centuries, dating to ancient Egypt, when King Menes set a gold-to-silver ratio of 2.5:1. While the ratio was stable for much of recorded history, silver deposits discovered over the last 200 years led to greater price volatility.
Investors might use the above method to identify emerging trends in the gold and silver markets and invest accordingly. For instance, when the ratio surpasses historic moving averages, silver may be poised to outperform gold.
Gold has been seen as one of the greatest ways to store and preserve value and wealth over the centuries. The long-term trend of its value growth solidifies its role as a safe haven for investors. Studying historic gold price charts and understanding the cyclic highs and lows can provide valuable information to guide an investment strategy.
It is a best practice to consult trusted financial advisors before making large investments, as each investor’s strategy, risk tolerance, and goals are unique.
