How to Read Gold Price Candlestick Charts: A Comprehensive Guide for Investors

Gold has always been the top choice for traders seeking a safe haven asset during market instability. But to trade effectively, you need to master how to analyze gold prices through candlestick charts. This is not an easy task, especially if you are new to the field.

Gold: Why Is It the Best Choice?

Over the past 50 years (1972-2022), gold has demonstrated impressive performance. This precious metal has ranked first among high-performing assets in the US 10 times, only behind real estate (REIT) with 12 times.

Notably, gold rarely hits bottom—only 11 times in five decades, fewer than commodities (9 times) and international stocks (7 times). The 50-year return on gold reached +4,084%, far exceeding inflation (582%) and most other assets, except US stocks (+18,529%).

These figures show that learning to read gold candlestick charts is not just a skill but also a key to making money from this market.

Major Historical Events in Gold Price

Worst Year:

• 1981: US investors lost -32%
• 2013: Down -28%
• 2008 was the darkest year for all assets: US stocks -37%, REIT -37%, international stocks -43%

Boom Years: Gold rose consecutively for 5 years with an average increase of 34%, while US stocks declined by 10% or more. US bonds only yielded 9% in the same period.

2022-2024 Period:

• Early 2022: $1,811/oz
• After Russia-Ukraine conflict (24/2/2022): surged to $1,936.30/oz
• October 2022: bottomed at $1,626.65/oz
• November 2022 - February 2023: increased 14% thanks to Fed’s dovish stance
• March 2023: surpassed $2,000 due to Silicon Valley Bank collapse
• Historic record: $2,183.49 at the end of 2023

Fundamental Factors Affecting Gold Prices

To succeed in gold trading, you must understand which factors are moving the market.

1. Geopolitics Gold is sensitive to international tensions. When Russia-Ukraine war erupted, gold prices in Asia and the US rose $6.6/ounce within days. The Israel-Hamas conflict in 2023-2024 is also a significant factor supporting prices.

2. Pandemics and Global Events COVID-19 proved gold is a true safe haven when stocks and crude oil plummeted. Each new variant causes short-term volatility in prices.

3. Economic Policies and Budgets When a country has a balanced budget, its currency strengthens → gold faces pressure. Conversely, budget deficits and weak economies → gold is supported.

4. Inflation and Interest Rates This is the most fundamental factor. When US CPI hits 7% (the highest in 40 years like in 2022), investors seek gold to protect assets. When the Fed raises interest rates by 0.5%, paper assets become less attractive → gold prices rise.

5. Central Bank Activities According to the World Gold Council, central banks bought 800 tons of gold from 1/2023 to 9/2023 (up 14% compared to the same period last year). This demand pushed gold prices up 10% in 2023.

6. US Dollar The inverse relationship between gold and the dollar is very tight. When the dollar weakens, gold rises, and vice versa. This is the most important factor that new traders should focus on.

Technical Analysis: Unlocking the Secrets of Gold Candlestick Charts

Technical analysis is based on a simple principle: past price action is the best indicator of future price movement. It’s not about prediction but about reading market psychology through patterns.

What Is a Candlestick?

Candlestick charts are the most effective way to display price movements. Each candle represents a time period (5 minutes, 15 minutes, 1 hour, 4 hours, 1 day, etc.).

Structure of a Candle:

• Upper wick: Highest price during the period
• Lower wick: Lowest price during the period
• Green candle body: Closing price > opening price (uptrend)
• Red candle body: Closing price < opening price (downtrend)

Candles not only show you the price but also reflect the market sentiment of buyers and sellers during each phase.

The Three Main Price Directions

1. Uptrend (Uptrend): Higher highs, higher lows
2. Downtrend (Downtrend): Lower highs, lower lows
3. Sideways (Sideways): Price trades within a narrow range

Doji Pattern: Reversal Signal

A doji candle appears when opening and closing prices are nearly the same, forming a “+” or “T” shape. This indicates market indecision—a potential sign of trend reversal.

Important Doji Variations:

• Long-legged doji: Price extends equally in both directions → extreme uncertainty
• Gravestone doji: Long upper wick + small body → possible reversal from downtrend
• Dragonfly doji: Long lower wick + small body → possible reversal from uptrend
• Four-price doji: Open, close, high, low at the same level → market has no direction

Technical Indicators to Improve Your Gold Trading

Moving Averages (MA - Moving Average)

This is the simplest yet most powerful indicator. MA 50 and MA 200 are the “holy numbers” for traders:

• When price is above MA 50 → short-term uptrend
• When price is above MA 200 → long-term uptrend
• When MA 10 crosses above MA 50 → strong buy signal

Relative Strength Index (RSI)

RSI measures buying vs selling pressure over 14 periods:

• RSI < 30: Oversold → buy opportunity
• RSI > 70: Overbought → sell opportunity

Fibonacci Retracement Levels

This tool helps identify key support/resistance levels. The main levels are 61.8%, 50%, and 38.2% of a price move.

Elliott Wave (Elliott Wave)

This theory suggests each action is followed by a reaction. Five upward waves are followed by three downward waves. Recognizing this pattern helps forecast market turning points.

Bollinger Bands (Bollinger Bands)

Three lines:

• Middle: MA 20
• Upper: MA 20 + 2 standard deviations
• Lower: MA 20 - 2 standard deviations

When price touches the upper band → possible upcoming decline. When it hits the lower band → possible upcoming rise.

Other Indicators

• ATR (Average True Range): Measures volatility
• Stochastic: Similar to RSI but more sensitive
• Pivot Points: Identify support and resistance levels for the new day

Timeframes: Choose the Right One to Make Money

Your chosen timeframe depends on your trading style:

Day Trading (Short-term Trading):

• Use: 5-minute, 15-minute, 1-hour charts
• Suitable for: Those who can monitor the market actively

Swing Trading (Medium-term Trading):

• Use: 4-hour, daily charts
• Suitable for: Office workers, part-time investors

Position Trading (Long-term Trading):

• Use: Weekly, monthly charts
• Suitable for: Those who want to hold gold as a safe haven asset

Is 2024-2025 a Good Time to Invest in Gold?

ANZ Research forecasts gold will continue rising to $2,200 by September 2024, supported by:

• Uncertainty in the US banking sector
• Prolonged high interest rates
• Increasing geopolitical tensions
• Persistent high inflation

Central banks worldwide keep buying gold, showing confidence in this precious metal as a store of value.

Practical Advice for Beginners

1. Recognize Your Bias If you are a “perpetual bull” (always optimistic), you might overlook sell signals. If you are a “perpetual bear” (always pessimistic), you may miss buying opportunities. Be objective in your analysis.

2. Position Size Should Be Appropriate Don’t allocate all your assets to gold. Most experts recommend 5-15% of your portfolio in gold or precious metals.

3. Choose the Right Investment Vehicle

• Physical gold: If you fear financial crises
• ETFs: If you want high liquidity
• Futures contracts: If you are a professional trader
• Gold mining stocks: If you want to capitalize on price increases

4. Monitor the US Dollar This factor influences 70% of gold price movements. Always pay attention to US economic data, Fed decisions, USD index.

5. Be a Contrarian When market sentiment toward gold is at its worst (lowest prices), everyone is selling, which is often a good buying opportunity. When everyone is overly optimistic (high prices), and everyone wants to buy, it might be time to sell.

6. Think Long Term Gold can be volatile in the short term. But looking at 10-20 years, the overall trend is clearly upward. Don’t panic when prices temporarily dip.

Conclusion

Learning to read gold candlestick charts is a time-consuming but highly valuable skill. You need to combine fundamental analysis (economy, inflation, interest rates), technical analysis (candles, indicators), and market psychology to make correct decisions.

Gold is not the fastest way to get rich, but it is the safest way to preserve wealth. Start learning today, and in a few years, you will become a proficient gold trader. Remember, every successful investor starts with the smallest first steps.