What is Gold Trading?

gold bar

Throughout history, people have always been attracted to gold. As far back as Ancient Rome Emperor Augustus set the price of a pound of gold to 45 coins. The precious metal’s premium monetary value endured, even when paper money replaced coins. By the 1800s, most paper currencies were redeemable in gold, which became known as the gold standard. It was only after 1971 when the US refused to honor the dollar’s value in gold that the world governments abandoned the gold standard for fiat (regular) currency. Still, to this day, central banks keep a part of their liquid reserves as gold, and exchanges allow transactions denominated in the metal.

A safe haven

It is this continuing value that makes gold trading a decent opportunity for one to earn money and pay off debts. Because of gold’s consistency through the years, it’s widely considered as a “safe haven”, or an investment that people can count on to limit their losses during events of economic downturn.

Gold trading isn’t difficult to learn, but it may require plenty of effort and research to master. And as with any investment, there are risks and rewards for investing in gold since it is impacted by supply and demand, fear, and inflation/deflation.

Know your options

There are a number of ways to trade gold. First is through a futures contract, which is an agreement to buy or sell an asset at a future date. Investing News explains that gold futures are an appealing investment because they allow people to trade without paying the full amount right away.

Gold can also be traded on a stock exchange like the SPDR Gold Trust Shares (GLD). The trust trades like any stock in that you earn or lose money for each share you own each time the price changes. The minimum price movement is $0.01 and that’s the amount you lose every time the price changes. However, one draw back is that to be able to trade gold funds, you would need a minimum of $25,000 in their stock trading account.

Another option is through contracts for difference (CFD). A CFD allows an investor to profit from an asset’s price movement without having to own the asset itself. FXCM explains that CFDs have benefits over other investments. For instance, there is no expiration, so traders can hold the investment for as long as they wish. Leverage is used frequently when trading gold CFDs, which allows for lower minimum rates, and increases both wins and losses.

Do your homework

For you to successfully profit from gold, you must learn the polarities that impact gold buying and selling decisions. It is also important to analyze both the short-term and long-term gold charts in order to make intelligent trading decisions. Once you are familiar with the process, it is relatively easy to earn funds that can cover debts.

Those interested in other trading opportunities can also look into Forex Trading.

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