Strategies for Trading Gold During Inflationary Times and Rate Hikes

By  //  July 24, 2023

Gold has always been considered a safe haven investment during uncertain times as a hedge asset. But in recent years, gold prices have been on an up-and-down roller coaster, reflecting the unstable economic and political situation.

The link between gold prices and inflation, however, can be complicated. Gold prices have occasionally increased alongside inflation, while at other times, they have decreased.

Several factors have influenced gold prices over the past few years. The inflation rate, which has been rising globally, is one of them. Due to its reputation as a secure hedge against currency depreciation, this has increased demand for gold.

The Federal Reserve’s initiatives, which include hiking interest rates to tackle inflation, are another issue. As a result, investors are finding alternative assets, like bonds, more tempting due to increasing interest rates, which has put pressure on gold prices. Geopolitical events, such as the situation in Ukraine, have also bolstered demand for gold because many view it as a safe investment in times of turmoil.

Key Factors Influencing Gold Prices Recently

Global inflationary pressures: Around the world, inflation has been on the rise and has, in some places, reached its highest point in history. Due to this, demand for gold has increased as a safeguard against currency devaluation.

Fed policy tightening: In an effort to fight inflation, the Federal Reserve has been raising interest rates. Because increasing interest rates make it more appealing for investors to hold other assets, such as bonds, this has put pressure on gold prices. The Fed plans to increase rates gradually, which may reduce the effect on gold prices.

Heightened geopolitical tensions: The conflict in Ukraine and other geopolitical issues have increased the demand for gold as an investment for security. Gold is regarded as a tool to safeguard money during uncertain times. Geopolitical unrest will probably continue to support gold prices as they climb.

Technical Analysis

Uptrend and support levels: Two parallel trend lines have been tracing an uptrend channel for gold prices over the past few months. A crucial support level can be found at the bottom of this channel. Gold prices could reverse their upward trend if they fall below this support level.

The gold-silver ratio: The gold-silver ratio is a gauge of the price of gold in relation to the price of silver. It can be used to identify trends. When the gold-silver ratio is high, gold is generally more expensive than silver, whereas gold is often less expensive when the ratio is low. Trading signals for gold can be produced using the gold-silver ratio.

Key moving average indicators: Observing these indicators is also important in technical analysis. Potential price changes can be detected by observing how prices behave in relation to moving averages, such as the 50-day or 200-day moving averages.

Volume changes: Volume changes are necessary to confirm trends. It’s natural to believe that a trend with rising trade volumes will last longer than one with dropping levels. It is a bullish sign when gold prices and volume are rising. A bearish sign would be a decline in gold prices accompanied by an increase in volume.

Learning the analysis of gold price charts is essential to be a successful trader.

Fundamental Analysis

Fundamental analysis for gold involves evaluating significant global economies’ inflation and growth outlooks, tracking the policy guidelines of major central banks (like the Fed), and considering the influence of geopolitical developments on gold prices.

Trading Strategies

Trading skills can be enhanced by understanding different trading strategies and adapting to different market conditions.

Trend trading: Trend trading is a strategy that includes identifying trends in markets and trading in the direction of the trend. By keeping an eye out for breakouts and pullbacks, trends can be spotted.

Range trading: Range trading is a strategy that requires trading between the key support and resistance zones.

Hedging demand trading: It is a method that involves buying and selling assets that are anticipated to be in demand when there is a lack of confidence. These assets are also known as safe-haven assets, i.e., silver, gold, and U.S. treasuries.

In order to be a successful trader, you should have a solid grip on gold trading strategies.

How to Increase Profits?

Backtesting: Testing your trading strategies is a great way to see how they would have performed in the past. With Vstar’s demo accounts, you can test your strategies in a realistic environment with $100,000 in virtual funds.

Keep Learning: The better prepared you are to make wise trading decisions, the more trading expertise you will have. Learning about trading can be accomplished through a variety of methods, including books, online courses, and seminars.

Trading signals: Using trading signals can help you gain an advantage over your competitors. Instead of mindlessly following every signal you receive from a source of trading signals, it’s essential to validate them yourself.

Risk Management:

  •  Position sizing should be appropriately adjusted, which means never risking more than 1% to 2% of your trading capital on one trade.
  •   Identify the highest loss you are prepared to take on during a trade and the maximum profit you hope to gain by setting stop-losses and take-profits.
  • Opening positions in batches and closing them in batches means doing it gradually rather than all at once. This may improve profit maximization and risk reduction.


Gold prices are influenced by various circumstances, including inflation levels, Fed rate hikes, and geopolitical tensions, so investors must be flexible in their decisions. Rising inflation and fast rate hikes may lead to lower prices, while declining inflation and slower rate hikes, as well as geopolitical tensions that foster risk aversion, may lead to higher prices. Although short-term pullbacks and corrections are possible, the medium- to long-term outlook for gold is positive.