Gold is a metal that’s been valued across the world for centuries. Gold has an emotional and symbolic meaning which makes it attractive in cultures around the world, from being used in Royal items like a crown or chalet, to being the metal of choice for a wedding ring. Yet, gold is also a useful metal and is used to make many things, from electronics to wiring, dentistry, medicine, radiation shielding, and even color in glass.
The gold market is kept afloat by the fact that gold is a rare enough metal to keep its demand high and value stable. In fact, nearly all gold on earth came from meteorites that showered the planet over 200 million years after it was formed.
Today, gold is still a popular metal to trade thanks to its stable value. While historically gold was traded in person, today online gold trading is the most popular way of making a profit from this rare metal substance.
Below, we’ll walk you through everything you need to know on gold trading, including commission and fees.
How is gold traded?
While gold can be traded over the counter, it is most commonly traded on online exchanges. One of the most popular places to trade gold over the counter is in London, although over the counter trading is a fairly unregulated market, meaning it’s often a better option to trade on an exchange.
An exchange is a highly regulated environment where trading is centralized and accessible to gold traders across the world. Aside from London, the other two major gold trading hubs are New York (COMEX) and Shanghai (The Shanghai Gold Exchange).
One of the ways users can trade gold is by Contract for Difference or CFD. This is where gold is used for trading without physically buying or selling a physical product. Other methods also include Futures Contract which is primarily used for hedging purposes, and ETF (Exchange Traded Fund), which is where both speculators and investors trade or invest in gold.
The lowdown on gold trading commission
As of lately, gold trading commission has been at an all time high, making it an attractive and ideal time to get into gold trading. According to the Professional Numismatists Guild, the average commission for one ounce American eagle or Maple Leaf gold coins is about five or six percent.
What to be aware of when trading gold
While trading gold is highly rewarding, there’s also a number of things to look out for and be aware of when becoming active in the gold trading world. These include:
Knowing the reputation of your dealer
Ensure your gold dealer is a respected name in the industry with experience buying and selling gold, among other precious metals. It’s often best to find an ANA dealer as they are bound by a strict code of ethics and will provide the most reliable service.
Be aware of the cost per ounce
Prices of gold can fluctuate daily so it’s worth checking up on this often. Buyers can typically expect to pay a higher percentage over melt value for fractional gold pieces and bullion coins typically have a higher retail price.
Understand the risks that come with gold investment
Gold investment can be a profitable activity, however, like any other investment there can be a certain level of risk involved. Investors should be sure to do thorough research before starting to ensure they understand the different investment strategies available.
Follow online security best practice
When trading online, it’s important to be aware of your cyber safety. This includes ensuring you use adequate passwords to secure your accounts, as well as ensuring you use safe payment methods where your personal details cannot be taken. All reputable trading platforms should have the necessary online payment security in place already.
Gold investment strategies
There are many different ways of investing in gold and the type of strategy you choose depends on the amount you have to invest and the time and assets you’re willing to freeze in the process. Below, we’ll outline a few of these.
- Buy gold mining stocks – Purchasing gold mining stocks is a great option as it will give you a higher rate of return than the standard method of investing.
- Dollar cost averaging – A gold ETF or exchange traded fund matches the performance of the price of gold. One of the great things about this method is that you can sell off your position anytime you want to.
- Purchasing physical gold – Gold can be physically purchased from a previous metals dealer or at a local pawn shop. This is the most direct way to own gold and is an assured way of holding on to your investment.
Overall, investing in gold can be a highly profitable activity. Investors should ensure they do the correct research on commission and the fees involved to ensure their strategy is profitable, however there is a plethora of information available and a wealth of opportunity waiting.
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