Gold is one of the most in demand commodities on the planet today. As a result, the value of the precious metal is higher than the values of most other precious metals and it fluctuates quite often. This creates an opportunity for those looking for gains in the market. By taking advantage of fluctuations in the value of gold, gains can be realized. However, there are several ways to trade gold, leading to confusion for those that are just getting started. So today, we’ll talk about the most popular ways that gold is traded in order to give you an idea of some of the best trading vehicles available.
Gold Trading Vehicle #1: Physical Gold
It is arguable that the most popular way of trading gold currently is buying and selling physical gold. This can be done both online or in a gold broker’s office. Physical gold is most commonly purchased as a long term investment or a safe haven investment. To make money from the investment, the investor purchases the physical gold at the current market price. From there, the investor will hold onto the gold until the price of the precious metal rises to a point that is higher than he or she paid for it. At this point, the investor sells the gold and takes the profit.
Gold Trading Vehicle #2: Binary Options
Binary options have become an incredibly popular trading vehicle with regard to just about any financial asset over the past few years. Gold is no exception. When trading binary options, traders don’t actually purchase gold. Instead, they make predictions with regard to what direction the value of gold is likely to move in. If the trader believes that the value of gold is going to rise, he or she purchases a call option signifying the prediction that a rise is coming. If the trader believes that gold is going to fall in value, he or she would purchase a put option, signifying the prediction that a fall in value is coming. If the prediction is correct, the trader stands to earn a return of around 80%. However, if the prediction is incorrect, the trader can lose the principal investment entirely. Trading gold with binary options can be risky.
Gold Trading Vehicle #3: Futures Contracts
Another very common way to trade gold is by trading gold futures contracts. Gold futures contracts are legally binding contracts that define the delivery of gold in the future at a previously agreed upon price. Making money trading gold futures contracts is a relatively simple process. Essentially, the idea is to purchase a contract that allows the trader to receive gold at a lower price than what it will sell for in the future. If done properly, when the gold is received, the trader can then immediately sell the gold for a profit. For example, let’s say that a trader purchases a gold futures contract that says he will receive an ounce of gold at a cost of $1,180 a month from today. Then in a month, the value of gold climbs to $1,200 per ounce. Because the legally binding contract says that the trader will receive the ounce of gold at $1,180, the trader can now sell the gold with a $20 profit.
As mentioned above, gold is one of the most commonly sought after precious metals in the world, and it is an incredibly popular asset for financial trading. While there are several ways to go about trading gold, the three options above are the most popular, and for good reason. They just so happen to be the easiest ways to turn a profit through trading the commodity. So, what are you waiting for? It’s time to trade.