Over the past years we have experienced the biggest financial disruption in history since the Great Depression. Governments took several measures to restore confidence, but their monetary policy results in record deficits. This will increase inflation. Besides, high volatility causes uncertainty in the financial sector.
One of the most profitable investments in these turbulent times was undoubtedly gold. Gold provides a solid hedge from financial uncertainty and inflation, as it is highly liquid and relatively stable in comparison to stocks and bonds. Gold has always belonged to the favourite investment options. It was used as a legal tender for thousands of years.
You have many options to choose from, if you want to own gold. For example rare gold coins such as American Eagles have shown an outstanding long-term performance. Pure bullion gold coins are usually available in one-ounce, half-ounce, quarter-ounce, and tenth-ounce weights.
In the U.S. you can also have Precious Metal IRAs: Americans are allowed to place certain types of gold and silver coins into retirement plans since 1986. This way taxpayers can save on taxes by rolling over their retirement plans into gold or silver coins.
Coins should be kept for a minimum of 3-5 years or longer if possible. If you want to make money quicker, or want to use leverage (invest more money than you currently have), you can start trading gold. Online gold-trading platforms have became wide-spread during the last 5-10 years, it is really easy to access the gold market, even from your home or office. Everybody can enjoy the advantages of trading gold and remains one of the most popular commodities that can be traded today.
The advantage of gold trading is that no physical delivery of gold is required, traders can still make a profit from the increasing gold prices. Owning physical gold can be rather expensive.
If you get involved in gold trading you will not actually own physical gold, unlike purchasing coins. When you buy coins, you may suffer a loss, if the gold price depreciates. With gold trading, you can also short sell gold when you think its price will fall and thus maximise your potential returns or minimize losses.
The other difference of gold trading compared to owning coins is that traders usually keep their positions for a short period of time. If you opened a long position and the price of gold increases, you can quickly sell it. Thus you can place several trades a day, making a profit from the daily price fluctuations. If you hold the position for a long term, you may experience that you lose profit over time.
Many Forex brokerages also allow their clients to trade in precious metals and other commodities, such as crude oil. Gold trading is similar to any other type of commodity trading. First you have to choose a brokerage that is able to connect you with the gold market. An individual cannot get involved in the market directly, just like in case of Forex trading. Several brokerages offer their services including a 24-hour real-time access to the gold market, so it depends only on your personal schedule when you would like to place orders. You can place your trades within the system provided by your brokerage.
If you start gold trading, you enter a volatile market, where it is possible to earn a lot of money, but it is also possible to lose a lot. Many people see that the price of gold has significantly increased during the last year and want to jump into gold trading in order to earn some money. Always make sure that you do not over extend yourself to the point where you can lose all your money, so it's good to start by practicing trading on a demo account first.
The online platforms of the brokerages provide tutorials that walk you through the trading process. These assist beginners in getting started. It is also a good idea to enter the market slowly and get comfortable with it before you risk too much money.