Among the hundreds of commodities for which demand was created and disappeared over the centuries, gold is one of the very few that remained in the ‘shopping window’ until this day. It is an amazing fact that gold represents not only an investment option, but it is still a symbol of wealth for over 5,000 years.
Traditional usage of gold included the making of jewellery and the exchange of it as a currency in the form of gold coins dated back in 600 BC,and during the past few years gold is also being used as material for the production of electronic components. However, it’s pointless to argue that most people consider this shiny metal from an investor’s perspective. Gold is a ‘safe haven’ asset, which means that its value usually increases in periods of economic uncertainty and also when the U.S. dollar’s value decreases. Because of this property, long-term investors consider gold as a great way to diversify their portfolios and hedge against times of weak economies.
There are various methods to invest in gold, but choosing the right one is important to match an individual investor’s financial status, risk appetite level, and expectations. Bullion bars you see in movies and in the news is the preferred method of investment by nations’ central banks and large financial institutions. However, very wealthy individuals can also choose this investment option which is the cheapestin order to acquire physical gold. However, it comes with a risk as investors would not just store their gold bars in a kitchen drawer but they would have to spend more for storage purposes.Investing in gold coins is another method and is preferable by smaller investors who do not have the funds to lay their hands on bars. However, the price of gold coins comes with a small premium in relation to bars.
Investment in gold can also be made through the stock markets by purchasing gold mining stocks where investors can benefit from the regulation of the markets and the payment of dividends without the need for storage. Although in some cases shares may move in the opposite direction due to the company’s management and operational factors.
Another very popular method of investing in gold without the need physical acquisition is through Contracts for Difference (CFDs). A CFD is a contract between a buyer and a seller.The opening of a CFD is either buying or selling a contract with a forex broker, and it is the easiest and most popular way because of its simplicity, ease of trade, leverage, and ability to short sell in case an investor believes that the gold’s price will fall. For example, if an investor believes that gold will appreciate in value he buys one CFD contract at the current gold price. If the gold’s price increased afterwards, then the value of that contract also increases and when he sells it back, he’ll make a profit.
Due to the many methods to invest in gold, every investor will find the one that matches his personal trading style. Regardless of the method, gold is most probably a commodity that will remain highly valuable as it has been the case for thousands of years.
by David Parker
www.easy-forex.com
