How to trade gold on the exchange?
Gold has long served as money. First, from fairy tales, which often featured merchants and caravans, ships and pirates, then from the lessons of history we see that from ancient times it was customary to pay with merchants with this precious metal. Gold has always been considered a valuable and stable currency. Paper money in the form in which we know it now appeared in circulation much later and finally established itself in the international market closer to our time. Gold is an instrument for savings and an indicator of wealth – of an entire state or even an individual.
Why does gold remain an attractive investment? It refers to metals that do not corrode. The worst quality is considered to be 300-carat gold, which contains a high percentage of impurities. The highest – 750 standard, it contains 75% gold and only 25% impurities, which are responsible for the increased strength of the metal and its appearance. In gold reserves and banks, this asset is stored in the form of bars and coins with a fineness close to 1000 units.
In order to rely on something in the pricing of goods and services, the division of spheres of influence has historically been chosen gold and precious metals, oil, and currency. It is they, as the basis of the foundations and long-term reserves, that daily become the measure of the economic situation of states and partnerships.
Forms of gold trading on the exchange: how it is done
There are several ways to grow your profits and assets through gold trading, and market experts do not stop only at selling pure gold itself.
- Buying ingots. It would seem that everything is clear here. But in practice, there are many nuances. Traders can trade real gold on the exchange, or they can enter into futures transactions. This method is more based on the fictitiousness of the goods, and only a small proportion of such contracts are provided by the actual delivery of goods. Hedging is another basic technique in gold exchange trading. It is based on insurance of a fixed price for gold at the time of the execution of the contract, roughly speaking, it consists of freezing the price.
- Investments in companies for the processing of precious metals. Quite often, traders combine forms of gold trading on the exchange in order to get more profit. That is, they purchase the ingots themselves and at the same time invest in a company in the same industry. By investing in the shares of such companies, the trader also bears the risks that corporations may face.
- Investments in gold mining companies. As a rule, the leaders of this industry feel great despite the complex processes inside, and here's why. Gold mining is a very time-consuming and capacious job. Most of the large deposits have already outlived their usefulness, in many regions the complexity of mining is associated with climatic conditions, gold can be presented in the mines in bulk with a large proportion of impurities. But if the precious metal is in demand, and the supply does not cover the demand, the price rises. And this is exactly the factor that gold mining companies often play on. They deliberately hide the real production and their reserves, artificially raising prices to get more profit.
The specifics of gold exchange trading: 4 features you need to know
When planning to invest your capital in gold, you need to understand that this asset has its own characteristics and specifics. What will traders in the precious metals market face first of all?
- Established market players. From time immemorial, key players have emerged in such auctions: central banks, government agencies, large private investors, and the IMF. It is they who conclude the lion's share of contracts for the purchase of gold.
- The interconnection of all world events. The world economy, the financial stability of each individual country, political events are closely intertwined. Any resonant events that cause a surge in society entail changes in every element. In other words, the financial crisis, inflation, falling stock prices, and the unstable political situation in the country lead to distrust in the national currency. And this, of course, leads to the fact that, first of all, central banks, and ordinary citizens, are beginning to actively buy gold as the most stable, that is, a reserve currency that will be valuable in any situation. As soon as the spontaneous processes subside and the situation calms down, surplus reserves of precious metals are sold, and the price of gold decreases slightly.
- Correlation with oil prices and the dollar index. When the dollar goes down, gold prices rise, and vice versa. Roughly speaking, there is a clear opposite dynamic. The more expensive one asset, the cheaper the other. With oil prices, as a rule, the opposite is true: with an increase in oil prices, gold quotes also rise.
- High liquidity. That is the ability of a product to turn into money. Demand and prices for gold are not losing ground, and over the past decades, they have only increased in price. This means that buying gold as a long-term investment is a profitable decision. The price for it will definitely not fall, and if the quotes for it collapse down, they will briefly and very quickly return to the previous indicators. In this regard, it is considered a more reliable asset than floating exchange rates or shares of even the most successful corporations. Gold can be sold at any time at prices close to those at which it was bought.
How to trade gold on the exchange?
In gold trading on the exchange, as well as with securities, an intermediary is required – a broker who represents the interests of his customer on the exchange and opens an account. Of course, Ukraine has its own small deposits of gold, but they do not correspond to the idea of a proper national reserve. Therefore, the central bank itself (NBU) imports and buys precious metals on large international exchanges. The main ones are located in London, Chicago, New York, Sydney. Sometimes government agencies can carry out transactions as clients of authorized banks: this allows you to quietly build the necessary balance of power.
Ordinary mortals can try their hand at the currency exchange and the precious metals market in Ukraine, as well as trade on open exchanges. They provide access to all trades 24/7, allowing you to buy, sell, forecast, and use futures. The working period is divided into two sessions, at the end of each certain values are fixed. Day trading is always more unpredictable.
First of all, you need to choose the right strategy. Pros know that the gold trend is a long-term investment, so few people are chasing quick profits. Although, it is not without exceptions here. Gold is sold in ounces. This weight measurement is not very popular, but it is recognized as a standard in the international precious metals market. Typically, the minimum lot is 100 ounces.
Gold is an economic independent asset, without an issuer, which does not lose its value for centuries, it can be bought both physically and assets can be stored in an impersonal metal account in a bank.