Although it is possible to invest in trading with other types of metals like silver, gold still stands out for its attractive color and luminosity. Plus, being an almost indestructible resource, it’s scarce enough to prevent commodities from flooding the market with it and driving its value down. But at the same time, it is abundant enough to maintain liquidity in the market.
Advantages and disadvantages of gold trading
Like everything in the world of investing, the gold trading has its advantages and disadvantages. Knowing them is what helps a good investor to make sensible decisions at the right time. In this section, we will give you more details:
For years, gold has been a good hedge against inflation. When we are in times of crisis, the stock market is in difficulty and therefore the value of cash. In such situations, gold can be the best option to invest.
Like investing in other assets, gold also fluctuates causing it to experience high volatility from time to time. However, for a long time this metal has retained its value, so it is considered a stable investment.
Gold is a very liquid asset, which means buyers won’t have to struggle to find sellers in the market, and vice versa. The advantage of this fact is that reduces the costs of transactions that must be carried out.
One of the most notable disadvantages of gold trading is the storage system. Depending on the amount of gold you have, the investor should look for safes and vaults that are not cheap at all.
If an investor holds some stocks, you can get paid profits, and if you have money stored in a bank, you get interest on it. But in the case of gold it is not like that, this metal does not produce any return.
Factors that affect the price of gold
Several factors can negatively or positively influence the price of gold. But the best known are:
- Gold is considered in most cases as a safe haven. However, when periods of geopolitical tension arrive, prices tend to rise.
- When investors fear inflation, gold often appreciates because the idea of keeping cash safe is unattractive.
- Monetary policy is another factor to consider. Gold and the dollar have a completely inverse relationship. So if the dollar goes up, gold goes down, but if the dollar goes down, the price of gold goes up.
Are you a beginner? Follow these gold trading tips!
The gold trading suits for all types of investors, even for those who are beginners. But before starting to operate with this metal, the investor must understand very well the main characteristics of this asset. An accurate assessment will help you assess whether you have enough strategy to trade gold.
After making the decision to start trading gold, the investor must find the most suitable product according to his trading style and strategy. You will need to choose between the Cash CFD product or the Futures CFD product. Thereafter, it is important to consider the trading platform you want to operate with, one that is reliable and secure.