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What Is Gold Trading and How Can I Trade Gold?

Gold is a popular commodity that people have been investing in for centuries. It is a precious asset and relatively easy to liquidate if you need money. Therefore, gold trading is a common choice for many people who want to invest their money in a profitable commodity.

Like any other commodity, gold trading is lucrative and allows investors to earn a good return. So, if you are a beginner investor and want to learn about investing and trading gold, then this article is for you.

We will give you an insight into gold trading, a brief history of its value, and the ways you can trade it. So, without further ado, let’s get right into it.

What is Gold Trading?

Gold trading is about buying and selling the commodity to earn a decent profit. The gold market entails speculation, where investors aim to purchase the commodity at a low value and sell it high. This trading strategy is similar to other high volatility markets such as stocks and crypto.

gold bars

Investors can also take a short position if the gold’s value is projected to fall. Gold trading requires investors to carry out due diligence so that they can trade the precious metal for a profit. They have different instruments available to invest in gold, like gold mining company stocks and more.

Nevertheless, investors should know that the market is full of uncertainty, and gold trading comes with many risks. While chances of making a profit are good, you might lose your investment in gold trading.

History of Gold Prices

Before your journey in gold trading, you need to know about the significant ups and downs in gold values and their reasons. Here is a table showing the lowest and highest prices of this metal and the reasons impacting the value throughout the last few years.

YEAR LOWEST VALUE HIGHEST VALUE REASONS FOR THE CHANGE
2018 1,178 (USD) 1,355 (USD) Changes in the interest rates helped the dollar to gain strength, causing its price to retreat by the end of 2018.
2019 1,269 (USD) 1,546 (USD) Gold touched the highest value in six years since interest rates dropped as there were fears and speculations of a recession globally.
2020 1,474 (USD) 2,067 (USD) Gold value goes up to a record because of the covid-19 pandemic.
2021 1,684 (USD) 1,943 (USD) Not the greatest of 12 months for this commodity since 2015, as the demand for the commodity weakens
2022 (Year to Date) 1,788 (USD) 2,039 (USD) Gold value crosses the $2,000/oz mark due to the Russia-Ukraine war. Afterward, it continued to drop due to increasing interest rates and predictions about a global recession.

How Can I Trade Gold?

trading

As an investor, you have the choice to pick any way for entering the commodity market. However, having a good investment plan and an optimal solution per your portfolio composition is vital. Here are some ways that can utilize for gold trading.

CFDs

CFDs, “Contracts for Difference,” are about holding a position on the price fluctuation. It is an agreement between a gold trading broker and an investor. The trader’s main aim is to profit through the difference in the opening and closing trade for the duration.

If the gold prices have increased from their initial opening value when closing the contract, it will yield a positive return. However, if the gold prices have decreased from their initial opening value, the investor will suffer a loss. Therefore, you need to be careful when choosing this gold trading option.

Gold Futures

It is a contract when you purchase or trade a particular commodity at a price on a fixed time. The usage of futures is widespread for hedging in various financial markets.

Gold stocks

Another way to invest in this commodity is to get your hands on shares of the companies that mine gold. Investors can conduct go through the financial statements to search for the gold trading and mining companies listed that are available for the general public.

Gold Bullion

Gold bullion is the traditional form of investment. Investors can purchase this valuable asset in the form of:

  • Bars
  • Coins
  • Nuggets

Many people choose this gold trading option because it comes with fewer complications. It is easy to trade and hold gold physically and less risky since it does not have any contact with the financial system. But, you would need to bear the storage costs to keep your gold secure.

Gold ETFs

Lastly, putting your money in an ETF is also an option for investors who want to invest in this commodity. The ETF stands for exchange-traded funds and is the same as trading in the stock market.

Final Word

The gold market offers a lucrative opportunity to various investors. You can earn an optimal return through gold trading if you purchase and trade this commodity at the right time.

Nevertheless, gold trading means dealing with uncertainty and speculation, which requires investors to carry out research before entering it. With proper understanding, investors can mitigate the possibilities of loss and earn a decent profit on their investments.

Want to get started with online trading? Here you’ll be able to get a glimpse on how to get started with Etoro.

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