Remember the ancient times when currencies have not yet been invented? The economy of world nations depended on precious metals such as silver and gold as their medium of exchange, and the one that possesses the highest value among all metals is gold. Several centuries have passed, and countries have been developing and using their own currency. But still, the value of this particular yellow metal keeps increasing to this day.
Gold is one of the original forms of currencies that possess excellent stability in the world economy. This yellow metal has survived through many different economy crises, and even though there were times when people seemed to lose interest, it still bounced back.
What is more, gold is immensely malleable and resistant against corrosion and rusting, plus it can be used for numerous purposes such as industrial, health, and jewelry. The process of excavating gold from mines is costly and time-consuming. That is why gold has such a high price in international markets and is perceived as a global symbol of wealth and prosperity. You can ask anyone in the world, and they would agree that the more gold a person owns, the richer they are.
Gold trading is one of the oldest forms of trades. It is also the easiest because basically, you trade your money to buy a certain amount of this precious metal. The simplest form of gold trading practice can be found in our daily lives. For example, when you go to the jewelry store and buy a pair of gold earrings, you trade your money to buy gold. On the other hand, if you sell your gold jewelry to obtain some cash, you trade your gold for some cash. That is gold trading in its most traditional sense.
The traditional way of trading gold is simpler and easier indeed. However, it only works up to a certain level. Why? Imagine owning and saving, say 10 million USD worth of that precious yellow metal in your apartment. You will be facing a whole different level of risk exposure. For that reason, there are currently better and safer ways of trading gold: through the Forex market.
In the Forex market, gold is symbolized with its international code: XAU. It is usually traded against the United States’ dollar since the United States is the country that possesses the most significant gold resources in the world. The Gold-USD pair symbol in the foreign exchange market is XAU/USD, which tells the traders how many USD (the quote currency) they will need in order to purchase one ounce of Gold (the base currency).
You can start trading gold online immediately once you have registered and opened a Gold trading account on a broker’s website. Even though there are numerous trading brokers in the market, only a few can adequately accommodate traders with exceptional gold trading services and facilities. Therefore, it is highly recommended that you select a prominent and trustworthy broker to assist you in your trading operations. Here, you can find top rated Gold trading Forex brokers:
Statistics show that gold investments have led to tremendous positive results over the past century. Even those who showed no interest in gold during the 90s, immediately went back to gold trading once the global economic crisis stroke in 2008, causing the gold price to shot up twice its value. Ever since then, the price of gold has been snowballing over 1,000 USD.
For that reason, trading in gold has always been a good investment with various following benefits for the traders:
1. International Market Liquidity
If you participate in gold trading, you will have access to the high liquidity of the international markets. As we all know, gold is a malleable metal that can be used for almost anything, so there is a high global demand for gold. Not to mention how appealing the value of gold is to professional investors. These investors will add to the number of gold demand in the international markets, thereby creating higher liquidity in the gold market.
2. Stable and Tangible Asset
Gold is a real product. It exists in different forms with various functions, but the point is that you can see, feel, and touch the metal. And this malleable metal is being traded in real trading activities for various reasons in many parts of the world like England, America, Germany, parts of Asia and the Middle East.
In that case, we can safely say that trading in a real and tangible product that has an extremely high and stable value is far more promising than investing in assets like currencies and stocks. Intangible assets like currencies and stocks are influenced by factors such as politics and media coverage, whereas the value of gold is not greatly affected by sudden media headlines.
3. Safe Investment
During times of financial crisis, you can always count on your gold investment.
Gold is in high demand for many trading activities since it is real and tangible. There is no way that this priceless metal will become worthless, and that is why people consider gold a safe investment.
4. Hedge against Inflation
Inflation is a big scary monster for traders because it can turn their investments into a significant loss. However, if you participate in gold trading investments, it can protect you as a hedge against price inflation.
For example, gold is famous for its effective hedging capability against USD inflation. Therefore, when there is significant inflation that can cause a reduction in the value of USD, gold will become more expensive. If you participate in gold trading, during USD inflation, your gold investment will protect and compensate you for the falling value of USD through the metal’s skyrocketing prices.
5. Diversifying Trading Portfolio
As a professional trader, it is always essential to have a diversified trading portfolio to make sure that your investment does not depend only on one type of asset. Gold trading will be a good option in your portfolio diversification because its price value will increase when other paper investments start to weaken.
Although the gold price seems to be more volatile in the short-term, it will provide a promising revenue as a long-term investment for your trading portfolio.
The nature of gold trading is different from that of foreign exchange trading. Therefore, a trader must consider a lot of different factors before choosing between trading gold and Forex:
1. Trading Objective
Choosing between trading gold and Forex will require traders to take a closer look at their trading objectives in the first place: Are you a day trader? Do you trade for a living or you consider it a short-term investment? Do you need short-term or long-term investments?
Day traders who live on their trading operations, usually prefer intense trading activities with higher returns, which is why Forex trading is a better option for them.
On the other hand, traders who engage in trading activities for long-term investments will probably be more interested in gold trading because it shows a more promising revenue in the long run.
2. Appetite for Risks
If you are still in two minds about trading gold or Forex, you might want to take a look at your appetite for risks. It is important because, in terms of risk value, gold trading and Forex trading carry different levels of risk.
Trading currency in the Forex market means exchanging one currency with another, and in this process, the value of currencies is highly dependent on numerous factors such as the origin of the currencies and their relation to the world economy. The value of a single currency can increase or decrease in a matter of seconds. This is one of the many reasons why the risk value in Forex trading is extremely high that brokers are required to put a warning on their websites. If you are the type of traders who enjoy the thrill of experiencing high risks, Forex trading will be more appealing to you.
On the contrary, traders who favor less risky trading experience will be safer to choose gold trading, since the value of gold is more stable. In other words, if you want to trade and acquire more assuring results, then you should try trading gold.
3. Capital Amount
Traders’ capital amount is also a determining factor in choosing whether to participate in gold or Forex trading.
Trading currency in the Forex market is getting easier nowadays due to its increasing popularity. There are numerous brokerage companies that compete with each other to gain more clients; this leads to less demanding requirements for trading Forex. You can open a live account on a Forex broker’s website with as much as 5 USD, and start trading immediately.
Unlike Forex, trading gold would require a higher level of capital. Most brokers recommend a capital as high as 5,000 USD to be able to trade gold properly. So if you are experienced and have the amount of money, trading Gold will be preferable for you.
4. Level of Trading Expertise
Professional traders who want to diversify their trading portfolios, or are simply bored and in need of new challenges, will find both gold and Forex trading a perfect choice.
Beginner traders, on the other hand, might want to start small depending on their preferences and circumstances as previously mentioned. It is also advisable that beginners seek proper trading education and start with a demo account before joining any real trading activity.
