Over long periods of time, gold has been considered to be one of the most important precious metals compared to coins or other types of assets. Gold enjoys a privileged position in the global economy, so investors use it as a hedge against inflation or to pass their wealth from one generation to the next.
There are many methods to invest in gold, starting with the actual purchase of gold bars and their storage or speculation in gold through both spot and futures prices, in addition to stocks and investment funds traded on global stock exchanges.
Published by Forbes (Forbes) A report written by Doc David Trace explaining how to invest in gold and its various mechanisms.
Investment or trading.. which is better?
At the outset, the report defined the difference between investing in gold and trading via the Internet, and emphasized that each type of investment has different goals from the other.
Advantages of trading in gold
The report indicated that investors resort to gold trading in the following cases:
- Speculation on the rise and fall of the price of gold.
- Make profits without owning gold as a metal and storing it.
- Diversification of the investment portfolio.
- Hedging and fear of inflation.
Advantages of investing in gold
As for investors who prefer actual investment in buying gold, they usually resort to that for the following reasons:
- The investor’s desire to actually own gold bullion.
- Long-term investment or inheritance of wealth to children.
- Not paying taxes.
- Fear of inflation and keeping gold as a safe means of saving.
- Desire to build a diversified portfolio.
Factors affecting the price of gold
Before you start investing in gold trading via the Internet through the platforms dedicated to that, you must know what factors affect gold prices globally.
- The value of the dollar: It is natural for the rise or fall in the value of the dollar to affect the price of gold, because gold is priced through the dollar, and there is a strong relationship between the two. Any automatic increase in the value of the dollar will have a negative impact on the value of gold.
- International oil price: The price of oil is closely linked to the price of gold because of the value of the dollar and its presence as an appraiser for the two, and the rise in crude oil prices increases inflation, which is reflected in gold prices.
- Global stock markets: Given that gold is a safe haven for investors, any sudden decline in the global financial markets often leads to the flight of investors and their desire to buy gold.
- Central Banks: These institutions buy gold to regulate their reserves with the aim of stabilizing the value of their currency, which leads to higher gold prices.
In another report published by “Admiral Market” (AdmiralmarketsWritten by Brandi E. Blackler, explaining how gold can be traded online. The report stated that there is more than one way to trade gold through various platforms, the most important of which are the following:
Trade gold in futures contracts
Gold is traded at 100 ounces per contract, and a futures contract is an agreement between two parties to buy and deliver a commodity such as gold at a specified time in the future. Futures contracts are among the investments that are not preferred for beginners to resort to, as they contain risks that may lead to the evaporation of your capital, while it may double it in a very short time if you can achieve gains.
For example, for every 1 pip the index moves that equates to $100. If you buy gold futures contracts and they move $10 up, this means that you will achieve a gain equivalent to a thousand dollars, but if the index moves in the opposite direction to you, that will equal a loss of a thousand dollars.
- You can trade gold 24 hours a day.
- You can trade with higher leverage.
- Big gains in a short period of time.
- Futures contracts expire on certain dates which may make it impossible for a trader to hold a position for the long term.
- Futures trading requires a large amount of capital.
- The investor may suffer large losses greater than the original capital if he uses leverage.
This is the most common type of investment for online gold trading, which is the buying and selling of shares of global mining companies.
The rise in stock prices with the rise in the value of gold due to the increase in buying demand.
Stock prices often do not match the price of gold itself as a metal, because of what these companies may often experience in mining difficulties or losses for other technical reasons.
Exchange Traded Funds (ETFs) are exchange-traded funds designed to track the price movement of an asset, index or basket of stocks. ETFs are one of the most important ways to indirectly invest in gold.
- Diversify the investment portfolio across many financial instruments.
- Investing without keeping the metal itself.
- Pay relatively high commissions compared to other types of trading.
- Some gold ETFs suffer from a lack of liquidity, which affects the ability to buy and sell them.