Gold has always been one of the most suitable assets to trade both for novice traders as for the seasoned and professional investors. Gold is used to make jewellery, as a conductive material that does not corrode, for the construction of spaceships and even in medicine. Besides its physical uses, gold is popular as one of the most frequently traded precious metals. It is because gold has always been viewed as a safe haven. The yellow metal is not subject to dramatic fluctuations inherent to major currencies and foreign exchange markets’ volatility. Trading gold is not only available to governments and financial institutions. It’s an asset available to any private investor around the world. Here are the top reasons why we love trading gold and why you should do it.
Protection Against Inflation
Gold is an asset that is immune to inflation. If you look at the history of the US stock market, you will see that the Dow Jones fell over time with very high inflation while gold remained stable. Therefore, anyone worried about the potential impact of an inflationary situation should consider investing in gold.
Diversify your Assets Portfolio
Any reputable financial advisor thinks that having a diverse list of assets in your investment portfolio is essential. Although many people think that diversity only matters when it comes to a combination of stocks, bonds or currencies, gold is a great way to add a new dimension to your portfolio. And also some stability.
Limited Production Which Increases its Value
Unlike currencies, where heads of government can choose to put more money into production almost instantly, gold does not allow such a process. Since gold production is more labour intensive to set up, there are times when demand exceeds availability, and then the price of gold soars.
An Asset Sheltered from Geopolitical Crises
Although the value of currencies and stock prices tends to fluctuate depending on the political situation at any given time, gold tends to resist dramatic price fluctuations. That’s why it’s a great choice for those who fear their portfolio could be devalued—limited production increases the value of the yellow metal.
Gold is one the Oldest and Most Reliable Assets
Observing the market will let you know that any finite currency will decrease significantly at one point or another. Gold has maintained its value for millennia. Gold was, indeed, so precious in biblical times, and it is still so today. Even though the price does not always rise, gold has never experienced a fall, unlike other assets and even unlike the almighty US dollar.
Trading Gold Does Not Require the Real Storage
Gold is a metal that has succeeded in becoming a currency of exchange, which has enabled the unification of the various world currencies. It is a safe investment, regardless of the form of purchase (coins, ingots, etc.). Indeed, its chemical properties make it a reliable solution and much more resistant than paper. In this context, you should know that trading gold is not synonymous with the gold’s real storage.
Most seasoned investors often prefer to invest in “futures” and therefore speculate on future gold prices and not on gold itself. Thus, the futures contracts offer the best possibility of trading gold on the stock market.
Several mining companies buy and sell gold futures on their own, allowing them to avoid price risks. It’s called “holding” and guarantees a sale of gold with minimized risk. Trading in futures prices offers many other advantages.
Also, brokers often offer the chance to open a position and sell short. In this way, an investor can make substantial gains on the rise and downside by benefiting from very significant leverage effects.