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Since the start of 2020 and beyond, we have been committed to precious metals/commodities investments.
· In today's world economy, precious metals play multiple and critical roles, both as traditional wealth preservation tools and with important applications in modern technology and industry.
The best way to buy gold in 2024
Stock indexes reversed course: many investors began to move money into protective tangible assets, and gold was one of them. How can gold protect your portfolio? Why do gold investors trust this asset? How to get into the gold industry and invest in gold? Read on to find out!
Why is gold important?
Gold (AU) has traditionally been seen as a medium risk investment asset. Unlike other assets, gold never loses value for the following reasons:
It can be used as a monetary equivalent and a universal means of payment.
Its reserves are limited and industrial demand is inexhaustible.
Global gold production and gold prices have been rising since the beginning of 2000.
This is partly due to the rise of electronic trading systems and easier access for investors via the web.
How does the gold market work?
There are market participants: gold mining companies and refining companies, suppliers, jewelry stores, central banks, precious metals funds, commercial banks, custodians, stock exchanges, mutual funds, traders and investors. Individuals, legal entities, investment and pension funds, etc., can act as traders and investors.
You can trade your own physical gold or open a non-physical gold brokerage account. In the first case, you are trading gold bars, coins, collector coins and gold jewelry. In the second case, you do not actually own gold bars, gold jewelry, gold coins (e.g., Canadian maple leaf coins), etc.; They own derivatives or securities that are linked to the price of physical gold. You don't actually store pure gold. Gold is traded on exchanges and over-the-counter (OTC) markets. Gold is traded under the symbol XAU.
How is the price of gold determined?
Calculate the global physical gold price in two markets:
Calculate the physical gold spot price in London. The London Bullion Market Association (LBMA) offers the London Gold Fix twice a day on weekdays. According to the five largest market makers in the gold market (Bank of Nova Scotia-Scotiamocatta, Barclays Bank Plc, Deutsche Bank AG, HSBC Bank USA), NA and Societe Generale to calculate the price of gold. The pricing system considers traders' orders and determines the average price of XAUUSD (spot gold/USD) as these orders are progressively executed.
Calculate the price of gold futures contracts on COMEX (CME Group) in New York.
The advantages of gold investment
The advantage of investing in gold is that traders are interested in this extremely liquid asset at any stage of market volatility. It doesn't depreciate like a particular stock or currency. In contrast, gold bars, gold jewelry, coins, etc., tend to rise in price during hyperinflation, a crisis in an advanced economy, bankruptcy, war, or pandemic. In the last century, there was even a gold standard for currency issuance.
Advantages of trading gold assets on the Forex market:
Market volatility is moderate and liquidity is high.
There is no risk of a sharp depreciation of the portfolio.
Low barriers to entry.
Long-term profitability exceeds the profitability of bank deposits.
Another advantage of investing in gold is that it is easier to make price forecasts based on gold's past price performance. Gold prices are not affected by a particular economy. Gold prices are influenced by clear fundamental and business factors such as interest rates, inflation, GDP forecasts, the dollar exchange rate, gold mine conditions, cash flows, and so on.
Five ways to invest in gold
There are several ways to invest in gold bars, coins, etc. You can understand the difference based on several criteria:
1. Investment amount:
Small amounts can be invested in gold mutual funds, gold bank deposits or gold bars. Buying gold jewellery and coins, whose price will rise in line with the gold quote and the underlying value of the coin, is becoming increasingly popular. You can also open a brokerage account using Forex Brokerage services.
Large amounts of money can be invested in the stock market: exchange traded funds (ETFs) and mutual funds, gold futures trading, shares of gold mining companies.
2. The way to invest in gold
Direct purchase of pure gold: Buy gold bars, coins, gold jewelry. When you buy a widely circulated gold coin, you get an extra benefit from the increase in its value.
Indirectly invest in gold - Profit from exchange rate differentials: Invest in securities, gold mutual funds and CFDS.
Investing in gold: Pros and cons. How to invest in gold? Let's take a closer look.
1. Own physical gold
When you buy physical gold, you come into direct contact with gold. This means that after you buy physical gold, you can do what you want with it: keep it at home, in a safe deposit box at your bank, or in a secure storage place.
Advantages of bullion and physical precious metal trading:
The psychological effect. Compared to account data, physical gold bars seem to be a more reliable investment option for gold.
Availability. Items and personal accessories made of gold are part of everyday luxury. What's more, you can always trade your own gold items or pawn them at the price of scrap gold to recoup some of your expenses.
Cons:
If foreign residents want to buy pure gold, some banks may impose additional requirements on them.
Save. You can deposit your gold in a bank, but what happens if the bank goes bankrupt? It can only be accessed at any time if you store it in a safe. Keeping gold at home can also be risky. First, you need to make sure that no one will steal your gold bars. Second, yellow precious metals require permanent care and special storage conditions to avoid oxidation.
Liquidity. You can't sell gold at home with a few clicks like you can sell securities.
Mobility. Transporting physical gold abroad is regulated by law, and the owner is usually not the one who benefits from it.
Sell gold. You can easily sell the gold bar back to the bank that previously sold it. Other buyers may request an inspection. Some countries impose value-added tax on gold transactions. The total cost can be as high as 20-25% of the value of the precious metal.
2. Gold Certificates
In the United States, a "gold certificate" was a security issued by the U.S. Treasury until 1934 to certify the holder's ownership of gold held in a bank. Today, a "gold note" refers to an agreement between a borrower and a borrower under which the borrower (issuer) is obligated to repay the borrowed funds. The amount will depend on the exchange rate of gold. Holders of gold certificates do not own the actual gold, have no right to physical delivery, and are not guaranteed against the issuer's bankruptcy.
Gold certificates can be compared to bank deposits. Many investors deposit the equivalent currency in their gold accounts at banks, but do not buy physical gold. Instead, they are entitled to receive the money back, with interest, at the price in effect at the expiration of the predetermined term. Disadvantages of gold deposit:
High bank margin - about 8-10%;
There is a risk of loss of deposits: the deposit insurance fund does not provide guarantees;
Gold deposits in the event of bank bankruptcy in some countries.
3. Buy gold ETFs (exchange traded funds) and mutual funds
Investors buy shares of ETFs and mutual funds to invest in physical gold assets in global markets. The SPDR Gold Shares ETF and iShares Gold Trust are a few examples of such gold funds. It is the largest investment fund in the world and its assets are 100% backed by the gold it owns.
Another option is to invest in a gold mutual fund (such as the Franklin Gold and Precious Metals Fund). The investor must contact the asset management company and entrust the money to the company (mutual fund). They will then receive a certificate that they are entitled to the deposit and interest income.
Advantages:
To invest in gold mutual funds, you don't have to go directly to the stock market.
Gold ETF shares are highly liquid.
Cons:
Threshold of entry. To buy gold ETF shares, you need access to a stock market exchange, which incurs exchange fees, brokerage fees, and management fees. Investors must qualify as "accredited investors."
Liquidity. In most cases, mutual funds do not allow investors to withdraw money early without paying an early withdrawal fee. In addition, if the mutual fund loses money before the certificate matures, then the investor may lose both profit and capital.
The risk of bankruptcy.
4. Gold CFD trading
CFD stands for "Contract for Difference". This is an agreement between the parties to pay the difference between the offer in effect on the start date of the agreement and the termination date. From a technical point of view, it looks like this: Traders from all over the world open an account with a broker, verify their identity, top up their account, and then enter into trading to sell or buy assets. Brokers earn commissions. CFDS are linked to spot gold (XAU) quotes. As with gold certificates, traders do not own the actual gold. Please note that CFDS are complex trading instruments, so seek advisory or brokerage services before using them and making any investment decisions.
Advantages:
Low barriers to entry. For example, LiteFinance's XAUUSD (Spot gold/USD) contract terms stipulate a minimum trading volume of 0.01 lots, a margin ratio of 1%, and leverage of 1:100. Each hand has 100 units.
If the price of XAUUSD (spot gold/USD) is $2000, to buy a minimum volume of 0.01 lots, you only need $20.00 (2,000*100*0.01*0.01), which is less than the minimum deposit of $50.
The cost is extremely low. No stock trading fees. Each lot traded in a brokerage account has only spreads, swaps and small fees.
You can open a short position. With a Forex broker, you can trade XAU CFDS and make a profit even if the price of gold falls.
Leverage of 1:100, the leverage of stock market brokers usually does not exceed 1:10.
Cons:
Low volatility makes this type of gold investment unsuitable for scalping and short-term trading strategies.
Because you have to use more leverage and increase the volume of trading, this gold investment will be riskier than normal investment compared to currency pair trading. But bigger gains often come with risks, and if you have a professional team or expert at your side to guide you, you'll be lucky.
5. Gold futures and options trading
Gold futures trading and options trading are similar to CFD gold trading: the trader opens an account with the broker, and in order to avoid fraud, it is recommended to check through platforms such as MSB, WikiFX APP, with the difference that the trader becomes the real owner of the securities registered by the custodian. Gold can only be delivered on the terms of a commodity futures contract, but non-deliverable gold futures are more interesting for individual traders.
Advantages:
Promise: Regulators and stock exchanges strictly control stockbrokers. Securities purchased are automatically registered with the depositary.
Cons:
High barriers to entry. To buy a minimum lot and pay a commission, you need at least $2,000. Non-u.s. citizens will need a secondary broker authorized to work with a U.S. broker to trade gold on the U.S. stock market.
Complicated. Futures and options are derivative financial instruments. Their terms of use are more complex than those of CFDS or exchange-traded funds, so traders should be fully aware of these specifications.
If you are not an "accredited investor," the range of securities available is limited.
Gold Investment Summary
Historically, gold has been subconsciously viewed as the key to financial stability. The dollar is just a piece of paper that people trust. Dollars can be printed in any amount and may add to the national debt. Greece and Cyprus have shown how "reliable" state bonds can be. Hypothetically, if a global crisis occurs and major currencies are overissued, then currencies will depreciate against gold, as gold remains a global safe haven asset.
Who might be interested in investing in gold:
Active investors who want to diversify risk and balance their portfolios.
Conservative investors. Precious metals are more volatile than equity assets or cryptocurrencies. Although the price of gold has fallen in certain periods, gold has consistently shown an upward trend compared to currencies over the long term. Inflation explains this.
Investors who can tie up idle funds for at least ten years.
Investors with a low portfolio yield and a longer return time.
Do you think buying gold for five, ten or fifteen years is a promising strategy? Please contact us and let us discuss with each other. Also, if you have any questions about investing or trading, please feel free to leave them in the comments section. Open a demo account with a broker you trust and try your first trade! Please believe in yourself, you will get everything you want! I wish you success!
Interesting facts about XAUUSD (gold vs USD)
Historically, gold has been a means of protecting currencies from inflation and is an accumulation tool. As a natural resource that is difficult to exploit, it is highly valued and extremely difficult to destroy. This precious metal is used in industry, jewelry manufacturing, and to a certain extent in innovative technology. About 7% of gold is used to produce electronic equipment.
The metal was mined in large quantities during the gold rush in the United States at the end of the 19th century. Even in the 21st century, mining is still tough. Despite the advent of metal detectors and modern search equipment, the efficiency of gold mining still depends on human labor.
Although South Africa has long been a major producer of gold, China's gold production has soared in recent years. As China's demand for gold has increased, so has the market, as the Chinese believe that gold brings good luck and is the right investment.
The fluctuation of the XAU/USD quotation is affected by the economic slowdown or economic crisis, such as the Chinese economy. The XAU/USD pair is currently trading at a high level. Most commonly, gold is traded as a CFD through funds and gold futures traded on stock exchanges.
XAU/USD is best traded during the US and Asian trading hours. As China is a major gold producer, Asian investors will drive the gold market. Asian trading hours are 03:00 to 11:00. For the US trading session, US traders will influence the dollar price. Trading hours in the US are from 15:00 to 00:00.
Advice for all Forex investors
Recently, there are many criminals using the Internet to defraud people, we firmly oppose this kind of behavior, let alone do not want this to happen to you, in order to avoid this situation. We can conduct the review through some software, because the means used by these criminals and institutions are network vulnerabilities, and they cannot pass the security audit of the regulatory authorities.
For the safety of all investors' funds, we strongly recommend that you use MSB and WikiFX APP to review the trading platform before choosing it. MSB is the abbreviation of the Financial Crimes Enforcement Network of the United States. We must use licensed brokers that hold MSB financial licenses and are regulated by MSB. Make sure that the dealer you are using can keep your money safe.
About MSB
MSB Registrant Search is an online tool specifically designed to query and verify Money Services Business (MSB) registrations. It allows users to see if the dealer is registered and licensed with the relevant financial regulator by entering the dealer's name or other key information. It helps all investors identify legitimate money providers and avoid dealing with unregistered or non-compliant resellers, thus ensuring the security and legitimacy of financial transactions.
Through the tool, users can not only verify the legitimacy of money service providers, but also ensure that they are under the supervision of financial regulators. It also significantly reduces the risk of financial fraud and illegal operations. Its benefits include providing transparent market information, protecting investor safety, and promoting compliance and reliability in financial transactions.
About WikiFX APP
WikiFX is a global foreign exchange market regulatory information inquiry platform, focusing on helping users understand the legitimacy and credibility of various foreign exchange brokers, and providing investors with qualification review and regulatory information inquiry services to help investors identify risks and make wise investment decisions.
With WikiFX, users can access broker details, regulatory status, user reviews and more to help identify and avoid potential risks in Forex trading. The goal of the platform is to improve the transparency of the forex market and provide investors with a reliable reference basis. It also provides real-time reports and market dynamics so that traders can keep abreast of the latest market trends. WikiFX is committed to providing a transparent trading environment and professional support for forex traders worldwide.
Note: When searching for distributors after entering the page, you need to slide the page to the bottom and select the country/region as "United States", otherwise the query result is inaccurate
Focus on spot gold：XAUUSD
Spot gold (XAUUSD), also known as "spot gold" or "London gold", is the largest stock in the world. Because the volume of transactions is huge every day, about $20 trillion a day. Therefore, no consortium or institution can manipulate such a huge market and rely entirely on the market to adjust itself. There are no capitalists in the spot gold market, and market norms, self-discipline and regulations are sound.
Features: Real-time trading: Spot gold trading is usually carried out 24 hours a day, and is greatly affected by international market fluctuations, especially when major economic data or global geopolitical events are released, the price may fluctuate greatly.
Leverage trading: The spot gold market allows traders to use leverage, which means investors can trade larger amounts of money with less money. This leverage increases the potential gains of trading, but it also amplifies the risks.
As gold is widely regarded as a safe haven against inflation and economic uncertainty, spot gold is often the first choice for investors in times of global economic turmoil or currency depreciation.
· Global market: The main markets for spot gold trading include London, New York, Hong Kong and other international financial centers. The London market is the largest trading center for spot gold.
· Advantages of investing in spot gold:
High liquidity: Due to the large volume of the market, the buying and selling of spot gold is very easy, and investors can enter and exit at any time according to market conditions.
Inflation resistance: Gold has long been seen as a store of value and tends to rise in price during periods of rising inflation.
Diversification of investment portfolio: As an investment tool with low correlation with traditional financial assets such as stocks and bonds, spot gold helps to diversify investment portfolios and reduce overall investment risk.
· Risk warning: The physical gold market attracts a large number of individual and institutional investors, who look for value-added opportunities in this market through the analysis of the global economic situation. However, when investors participate in spot gold trading, they must understand the market risk and formulate a reasonable investment strategy to ensure the safety and return of the investment.
