Gold Trading: how to invest in Gold
Published: 31 May 2021 by Andrew
Gold Trading is an investment method that aims to obtain profits from changes in its price on the financial markets.
Today there are many different ways to trade gold, each with different implications for the investor.
Until a few years ago there were only two ways to invest in gold: the first is linked to the canonical forms of purchase while the second refers to a particular derivative instrument: Futures.
Today, however, there is a third way to go, thanks to the revolution introduced by online trading platforms. In this sector it is possible to invest in gold through some intermediaries, brokers, who have various advantages to offer.
In this guide to gold trading we will explore the best ways to invest in this precious metal, observing its price and the technical or fundamental factors that influence its trends.
Among the best strategies that we will analyze, a place of honor is occupied by eToro's Copy Trading (click here for the offer), a useful service for trading gold in a simple and automatic way.
Min. Deposit: 50€
Min. Deposit: 100€
Min. Deposit: 50€
Min. Deposit: 250€
Min. Deposit: 100€
Min. Deposit: 250€
Live chart of Gold quotation
Here is a real-time graph on the gold price:
Mastering indicators and knowing how to grasp all the clues that the charts offer can perfectly reveal the financial developments of this asset.
Gold Trading: the characteristics
Before going into detail on the various forms of investment, here is a summary table of the general characteristics of gold trading:
|Asset:||Gold Purchasing||Gold Trading|
|Type of investment:||Long term speculative||Short term speculative|
|How to do it:||Direct purchase||CFD, Futures|
|Who can do it:||Capitalized operators||Everyone|
|Where:||Authorized dealers||Online trading platforms|
|Capital to start:||Depends on the quotation||100 €|
Gold Trading today: buy physical gold?
Buying “physical” gold through various retailers is possible. In Europe, actually, this is something very recent, since until 2000 the purchase and possession of raw gold was only allowed to Exchange Offices.
Having said that, how is it possible to buy gold in Europe today? The “simplest” method is to contact authorised retailers, who can also resell it to individuals in various ways.
In this way it will be possible to buy gold in two different forms: ingots and coins. Compared to other metals, such as copper or palladium, there are a few factors to keep in mind.
For bars the question is quite intuitive: they have an intrinsic value, given by the quantity of gold in relation to the value of the same at that given moment.
The value of gold coins, on the other hand, is not given only by the amount of gold present in the coin in question. It is the coins themselves that have a value, which is given by the history and rarity of the latter.
What are the 3 reasons to avoid physical gold?
- First of all, buying from a retailer means interfacing with a third party, who in turn has bought the product and will try to make a profit by reselling it. In principle, the price will be significantly higher than normal, so it will not be easy to profit from it.
- Furthermore, this trading method requires a lot of knowledge of the gold market and of an infinity of dynamics related to it. It will be necessary to know several retailers to compare prices, know where to accumulate the gold purchased and how to resell it.
- Precisely the theme of gold management introduces us to the third problem. It is not possible to keep the gold reserves purchased under the pillow: these are generally entrusted to banks, which however will apply management costs.
Buying physical gold involves too many expenses and skills, and it is certainly not a suitable method for everyone, not surprisingly there are fewer and fewer individuals who favor this path.
Day Trading Gold: investing with CFD
Many investors are migrating to a different methodology: online trading.
The problem of gold management, combined with the presence of commissions, makes the previous investment method not very convenient and too cumbersome.
To eliminate these two problems there are CFDs.
It is a derivative instrument, thanks to which it is possible to invest without physically holding the asset in question and, above all, without paying commissions.
CFDs, Contracts for Difference, also have another advantage that should not be underestimated. Thanks to this derivative instrument, it is possible to invest both downwards and upwards, precisely by virtue of the fact that we are not physically tied to the asset.
This is why they are a preferable tool, also because they allow you to adapt your strategy based on market movements.
By buying gold with CFDs it will be possible to operate in the very short term, setting up perfect day trading strategies to take advantage of the typical volatility of commodities.
To use these tools it is necessary to approach intermediaries, called brokers, who will allow the user to trade gold or other assets on the financial markets.
Choosing a good broker will therefore be of fundamental importance.
Online Gold Trading: best platforms
To this end, we want to present you 3 alternatives that are decidedly above average in terms of offer, reliability and safety. We are talking about eToro, OBRinvest and Plus 500.
These are 3 of the best brokers certified by the EU major financial supervisory authorities, such as CONSOB, ESMA and CySEC.
The activity of these organizations is of vital importance: in the world of trading, unfortunately, it is also possible to come across fraudulent or opaque platforms, which can represent a serious risk for all savers who approach the sector.
Thanks to the aforementioned bodies, it will be easy to recognize a reliable broker, as it can boast the official certification of these supervisory bodies.
eToro: social trading world leader
Many readers will already know eToro (official website here), one of the best brokers in the industry for years, loved and used by millions of people around the world.
The reasons for this incredible success are many. Among the features that immediately catch the eye there is obviously the Social Area, a real social network within the platform, with which it will be possible to follow the movements of other users or to exchange advice and tips with them.
This is a very successful intuition, which has helped to move the quality level of brokers higher and higher.
Connected to the Social Area we have Copy Trading, eToro’s flagship tool, which has greatly simplified the world in which it is possible to make automatic investments in online trading.
Sign up on eToro now and invest in gold with Copy Trading!
Thanks to this tool it will be possible to choose another trader present on the platform and replicate, in a completely automatic way, any type of investment.
The advantage is not only for the trader who “copies”, but also the second user will benefit from this tool also in a passive way. The broker will, in fact, award prizes in relation to the number of accumulated followers.
Sign up with only 200 euros on eToro and invest in gold without paying commissions!
To conclude, we can say that eToro is with good reason one of the most successful brokers in the world, thanks to an enviable offer of original and effective tools.
It is literally a broker suitable for everyone, therefore both for experienced traders with years of experience behind them, and for all those who approach the sector for the first time.
Invest in other commodities with eToro, read guides on Nickel trading and Oil trading.
ForexTB: training first of all
More experienced traders know how much effort it takes to emerge in this industry. Without a good education it is difficult to make your way into online trading, as it is still a branch of the investment world.
Getting a good theoretical training in the subject may not be easy, especially at the beginning. For this reason, counting on a broker like ForexTB (official website here) can make a real difference.
This broker, in fact, offers a completely free manual to learn how to trade online of absolute quality.
Learn how to trade online with ForexTB's free manual!
Similar manuals can also be found externally, but they are generally sold at staggering figures (we are also talking about thousands of euros).
Furthermore, always for free, all users of the broker can have some of the best trading signals in the circuit, written by the best analysts in the sector.
ForexTB can also count other interesting features. The broker has two operating platforms.
- The first is proprietary and internally developed. It is an excellent entry level platform, therefore perfect for novices and still inexperienced traders.
- For those who need a more sophisticated trading experience, ForexTB provides MetaTrader 4, one of the best platforms available, as well as one of the most popular and used.
Invest in gold with MetaTrader 4 with ForexTB!
MetaTrader 4 is certainly less intuitive than the previous one, however, if well mastered, it can give you a lot of satisfaction.
These are the reasons why ForexTB is among the top platforms in the world by number of users, both among new entrants and among professionals in the sector.
Trade.com: trading signals
Trade.com offers a very precise and clear platform, simple but still full of very useful indicators.
Even a novice trader can immediately invest in Gold using CFDs, without paying commissions.
Trade.com has created a Trading Course (an ebook) and made it available for free to all subscribers. This Course clearly explains the main online trading strategies.
To download the Trade.com Course for free, click here
The Free Trading Signals sent by Trading Central to active Trade.com users are the most appreciated operational support of this Broker. The indications are precise and timely and become a basic element of trading with this broker.
Click here to get Trade.com Signals for free
To test the Trade.com platform without taking risks, it is better to start with the free Demo account offered by this intermediary, it is identical to the real one but uses virtual capital.
Gold Trading Strategy: invest with futures
After this important insight into the world of online trading, let’s see what is the latest way to invest in gold today: Futures.
Futures are also derivative instruments, however they are very different from the above CFDs.
First of all, they have to do with the purchase and sale of physical gold, which means ending up in the same problems already exposed in the dedicated paragraph.
Furthermore, it is not a mode accessible to anyone: the required capital is higher than CFDs, since here the commissions are really invasive.
There are two main methods for a saver to use these tools: credit institutions or investment funds.
Investing in futures through a lender means only one thing: commissions.
The bank obviously must receive its share for its role as an intermediary, which negatively affects the investor.
The second method is represented by investment funds and can be considered as a “passive investment method”.
It is a question of entrusting one’s savings to a fund that will manage them in the way it deems most appropriate. Costs are also expected here, but it is above all the little importance that the investor has within the fund that raises some doubts.
Having no say in how our savings are used can certainly be annoying, especially if the fund’s choices turn out to be wrong.
Obviously, compared to CFDs, it will not be possible to “invest downwards” so our destiny will ineluctably be tied hand in glove with that of the market.
In the event of an economic or sector crisis, the investor will have very few weapons to save himself, so even this methodology remains not very recommended.
Gold Trading Forecast: the influencing factors
How to understand what could be the future trend of gold? There are many factors that can influence the movements of this important commodity.
Some of these are more complicated to identify than others. For example, it is well known that from the 90s onwards, one of the factors that influenced the trend of gold was the way in which central banks operated.
Although many are aware of this, it remains complex to determine the precise effects of these movements, so there is a tendency to give greater importance to other factors, considered better indicators.
Among these we find inflation, especially that concerning the dollar, and the price of other metals, especially that of silver.
Another important aspect may be the price of oil, which has shown some influence on this market.
Finally, even strictly technical factors, such as data on economic growth in some countries, or interest rates (especially those in the United States), have shown that they can be good indicators for understanding the trend of gold.
At the end, we can sum up our analysis, trying to understand what is the best way to do gold trading.
Among the three modes described, CFDs proved to be the best in various respects. First of all brokers eToro, ForexTB or Plus 500 do not charge any commission, unlike banking institutions.
Furthermore, thanks to the possibility of investing both upwards and downwards, the investor will be able to profit whatever the trend of gold.
Obviously, although investing in CFDs is a preferable and definitely easier to access method, it should never be underestimated.
The study of the subject must always accompany and support all trading activities.
In this regard, it can be very useful to practice on one of the demo accounts offered by the brokers described.
In this way, novice users will be able to both learn in the field what it means to trade in gold, and approach brokers in a completely safe way, evaluating which one can best adapt to its characteristics.
Demo accounts are among the best ways to familiarize yourself with online trading or with a particular platform, as they allow you to operate on the financial markets using fictitious capital.
Having said that, we advise readers, if interested, to approach this sector with the right commitment, which can give great satisfaction if well mastered.
Gold trading is always well received by investors. It is one of the main raw materials worldwide. One that cannot be missing in a well-built portfolio.
To trade on gold as on many other commodities, it is better to avoid physical gold. Bureaucracy and high commission costs make it impossible to make a profit. Better to use CFDs (guide here).
Gold has a rather stable and not very volatile trend as a raw material. It undergoes strong fluctuations only in times of crisis, usually in these cases its price skyrockets.