How to trade and invest in Gold

Gold is one of the most traded precious metals in the commodities and futures market. It is also one of the most capped(must capitalized) commodities in the world. Since ancient times,  gold have been used as a medium of exchange as money is being used today. Today as we speak, gold is still being used as a backup for cash/currencies. Some big countries in the world today like the United States of America, Switzerland, Japan etc (see others)  have huge amounts of their reserves in gold. In fact it will surprise you to know that the receipt for gold from the black smith was what lead to the invention of money. Between  1998 to 2012 alone the value of gold soared by over 500% alone(see chart)

image source: https://goldiracompaniescompared.com/investing/historical-price/

So why is gold an attractive Investment?

1. Real value: Traditional money such US dollar etc have an imaginary value which reflects the state of the underlying economy. Take the the US dollar for an example the currency reflects the economic health of the united states of an America. Hence, should things get bad for America things will get bad to all investment tied to the currency. This is not the same for gold, gold's value is tied to the scarcity and beauty of the metal which is more tangible. The metal has a lustrous (shinning) surface that makes it good to be the outer covering of any finish work.

2. There is an everlasting demand for gold: Gold is a must have jewelry for every jeweler. Women love gold, royalty love gold. People just can't have enough for it.

3. Safe haven: Gold is a safe haven in times of economic crisis. When there is a panic in the market investors rush to buy gold because its value as said earlier is not anchored on anybodies economy. This makes the price rise when currencies are falling.

So How do I invest in Gold?

You can invest in gold via the following ways:

 

• Via the futures market: you can invest directly in gold via the futures market by opening an account with a futures and commodities broker but be warned the margin requirements (amount of free money required to be left after opening trades) is higher for commodities brokers than for Forex Brokers (see some nice reputable ones here). Gold is seen on on Forex charts as XAUUSD (that is gold against dollar) thus, we trade gold as the base currency and dollar as the quote currency. see a sample chart on tick mill

GOLD CHART SAMPLE from my computer XAUSUD

So if I were to buy gold I will simply purchase the pair, (XAUUSD) and will only make profit should the price on the chart go up. If I were to sell the pair, I will be selling gold and will only make profit should the price down. (kindly note selling the pair indirectly implies buying the US dollar since it is traded against gold)

Via Mutual funds and ETFs: You can buy gold without going through the hassles of learning how to trade my investing in mutual funds or exchange traded markets. Mutual funds are handled by experts while ETFs are market indexes that tracks an underlying financial instruments; in this case gold. 

What are the requirements for Trading Gold?

The requirements (also known as trading conditions) for trading gold varies for broker to broker. However you can trade gold with as little as 50$ for some broker. You can quickly look at TickMill and  Alpari here that has minimum trading requirements here.

Common Strategies to use for Trading gold

• Gold has been known to bottom around the $1200 price because quite a number of people feel that beyond that price gold mining companies will not be profitable hence won't sell gold below it. So you can look for buying opportunities whenever you see gold around this price
• Technical analysis do hold well for gold as a lot of hedge funds (commercial companies do trade them manually. These companies have huge funds that can move the market significantly.
• Buying in Global market crisis conditions: It is quite safe for you to move your investments to gold when the market is crashing. why? simply because a lot of people are doing so too hence price is bound to go up.

Bottom line

Trading gold is good if you know how to plan your investment portfolio well. In the item of crisis when other people are crying of market crash you will be smiling from market rush. If you got questions do mail me personally at majestinc5@gmail.com I love answering questions of enthusiastic investors.