When people hear of gold, their automatic impression is to think of something with great value or something of great importance. This yellow metal has always been a powerful object and has been a subject of attraction. Gold is widely-known and it is carved in the history of humanity. The whole world acknowledges this precious metal and many cultures associate it with power and wealth.
A number of investors diversify their portfolios with gold. Investors may have various and opposing interests but they have one in common, they are attracted to gold. Unlike coins, paper currencies and other assets, gold can preserve its worth, especially during chaotic times. Traders and investors use this precious metal as a hedge or a safe haven.
This metal has a negative correlation with most of the markets. Which means if the price of a particular market starts to fall then gold price rises. This historic metal is a good hedge — an investment which reduces the risk of unfavorable price movements. The value of gold greatly increases after a market crash, this is the reason why claims that gold is the best hedge for an upcoming market crash. In situations like market crashes, a lot of investors will sell their stocks to buy gold and later move back to their previous stocks to take advantage of the lower price in the market.
If you are interested in trading and investing gold or if you want to diversify your portfolio by including gold in it, then there are a lot of ways to trade it. It could be through gold bullions, gold CFDs (contracts for difference), gold ETFs (exchange-traded funds), gold futures, or gold options.
Gold bullions are physical gold, these are bars and coins. This is the most direct way to invest and trade gold. Though you should notice that trading by bullions is very expensive. When you trade in gold bullions, it is a necessity to have a reliable storage facility and the cost of storage is quite expensive.
Even if you don’t own an actual gold or mining shares, you can trade it through CFDs. You don’t have to be concerned about physically owning this metal. This derivative instrument is an agreement between an investor and investment firm. This agreement gives the investor an economic exposure to the company by having access to a part of its shares. Through CFDs, an investor or trader can speculate on gold prices.
Another way to trade gold is through ETFs — investment funds that are traded in a stock market. ETFs are financial instruments that trade like stocks. Thus if the stock market declines then ETFs will also fall. Gold ETFs are the same as CFDs, it provides traders and investors exposure to the price of gold to speculate about it. Gold futures and gold options are examples of Gold ETFs.
It is not wrong to assume that ETFs and CFDs are great alternatives for actual gold trading but traders and investors alike should be reminded and be aware that these financial instruments also involve risks. No matter how great an instrument is, if it is not managed carefully then it might just cause great damage. Here in Millennium-FX we showcase our clients with these financial instruments and provide them education to equip them with tools necessary for success. Trade with us now.