Don’t Forget To Follow The Trend Before Investing In Gold
There are many important points to consider before investing in gold, one of them is “Don’t forget to follow the trend.”
There is a golden rule that we should know when investing in gold: “Trend is Your Friend”. The gold investor often expects that local or global problems will push gold prices to new heights in the near future.
However, what will bring the investor to gain is not expectations and concerns, but an upward trend created by the price. During the period you invest in gold, if gold prices have broken an upward trend that has been going on for a long time and have started a downward trend for a while, your time and money will probably increase until the end of the falling trend, as well as your stress will constantly increase. The price is near the end of the uptrend, when traders generally believe that the price will rise much higher. On the contrary, when he believes that prices will not rise easily anymore, it is the moment when the return is close. Here is the golden question that will distract you from this wrong approach: What is the current trend?
Let’s exemplify the above approach for gram gold. Gram gold prices recorded a peak of 280 liras in August 2018, when the Pastor Brunson crisis was experienced. Then, in September, when the CBRT made a radical increase in the policy rate, prices started to decline from the peak they saw. This decline lasted for about 3 months and it took 9 months for prices to rise to the same level again. The average investor invests at any point in the downturn with the hope of “return from here” and exhausts all patience and hope until prices return to the price they invested in. However, one should not invest without making sure that the falling channel is broken. When you examine the prices on the chart, it was strategically correct to take a gram gold position in December 2018. The reason is that the falling channel movement, which started at 280 USD, broke the falling axis above 200 USD.
After the trend is caught, you should put the rumors aside and continue your investment, unless the trend is broken again. Thus, you could follow the position you opened in December 2018 in an ascending trend channel until December 2019, and then in a trend channel where the upward angle becomes steeper (that is, the price increases become more rigid). With the discovery of the coronavirus vaccine in November 2020 and the change of the CBRT Governor, breaking the long-term trend in gram gold prices was a sufficient basis for closing positions. I would like to emphasize here that we should never, ever have to worry about capturing the tops and bottoms. But we have enough arguments and technical infrastructure to analyze the right trend and move in the same direction as the trend.
As a result, closely monitoring the trend of prices while investing in gold is one of the most important strategies that will lead you to profit.
This article has contributions of doviz.com.