Facts about gold & gold investment

Facts about gold & gold investment
October 19 08:46 2017 Print This Article

When you investing in the capital it’s important that you have a diversified investment strategy where you allocated your capital to several securities.  Using a combination of stocks, bonds, cash commodities and forex will allow you to trade different strategies that work well in different market environments. Gold prices, are generally considered a safe haven asset that will perform well when most commodities and currencies are unwanted.  Gold can be traded in many different ways.  You can purchase it at a forex broker, you can purchase an ETF or you can actually buy gold bullion and store in a safe or a regulated storage facility.

Diversification

When you diversify your portfolio you generate a structure way of allocating your capital into multiple strategies and assets.  If you want to focus on riskier assets, you should consider stocks and commodities with some allocation to currencies and bonds.  If you want to be more conservative, your assets should be weighed in bonds and cash, with allocations to stocks and gold.  Nearly every portfolio should have an allocation to gold trading, as it will outperform when other currencies underperforming.

Diversification within assets means that an investor will look for strategies increase in value during specific market environment.  For example of a defensive strategy would be range trading using a mean reversion style of trading.  If you are looking for a safe haven asset, when volatility begins to rise, purchasing gold will outperform riskier assets.

Different Ways to Purchase Gold

The most efficient way to purchase gold is to buy an over the counter contract from a forex broker.  This type of security will rise when a specific gold benchmark rises.  The standard benchmark is London Interbank Gold.  The gold that you purchase is non-deliverable gold and you are only responsible for the difference in the price from where you purchase gold to where you sold gold.

Another popular way to purchase gold is a gold exchange traded fund.  The SPDR gold shares is an exchange traded fund that tracks the movement of gold. The GLD “seeks to reflect the performance of the price of gold bullion”, less the expenses of the operation of running the ETF. “The Trust holds gold bars and from time to time, issues Baskets in exchange for deposits of gold and distributes gold in connection with redemptions of Baskets.”

Alternatively, you can purchase gold bullion and store it in a vault that has comingled gold, where all the gold is the same, or you can put your gold in a safe at a bank or at your home.

How to Gold Trade

Gold trades like a currency, and the global benchmark is quoted versus the US dollar.  Prices are quoted in dollars per ounce.  When the dollar moves higher, gold prices will generally move lower is it becomes more expensive in other currencies.  While gold is sometimes viewed as a hedge to rising inflation, it is more often viewed as a currency that will provide protection during volatile market conditions.

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David Schantz
David Schantz

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