Gold Market: Day Trading and Investing in Gold

In times of financial crisis and stock market uncertainty, people naturally look for placement options to protect their money and make it fructify over time. Regardless of your investor’s profile, the chances are that you must have heard about the gold bar from which is one of the safest investments. In fact, thanks to its unique natural properties, this precious—and scarce—metal was adopted as a means of payment, exchange, and savings ever since it was discovered. Now, even with that, earning money with gold nowadays requires some knowledge and forward-thinking skills.

If you are new to the market and are looking to diversify your portfolio, have put together a useful guide to help you navigate the world of gold as an investment.

Brief history and characteristics of gold

Gold has been used as a financial instrument since time immemorial, well before the rise of modern financial economies. What makes this rare metal so appealing to investors is that it does not corrode or oxidize, which allows it to withstand in time. Besides, gold is extremely malleable, making it a very versatile and sought-after material in all kinds of industries. There’s a lot more to learn about gold through this specialized URL, which will equip you with strong knowledge for when conducting investments or trades. Until today, gold continues to be erected as a symbol of wealth, power and accomplishment.

How does the gold market work?

The term ‘gold market’ refers to the buying and selling of gold worldwide. As with any commodity traded on the market, gold prices fluctuate and are determined by supply and demand, reflecting its overall value; the higher the demand, the higher the price will be. It’s important to know that gold prices are unique across countries, and do not vary from one currency to another. Daily (or spot) prices are set by a conglomerate of financial organisms (stock exchange commissions, banks, and other institutions) from around the world.

Day trading operations

In simple terms, day trading in gold involves speculating on its short-term price variations. 

To help you get more insight, here’s an overview of the most common types of gold trade options:

  • Futures Contract – This is certainly the most popular way to trade in gold. When you purchase a futures contract, you agree to buy/sell a particular commodity at a future date (without taking physical possession of it). At the end of the day, your profit–or loss–will be the difference between the contract’s buying price and how much you sold it for. A standard contract at the Chicago Mercantile Exchange costs $10 for 100 ounces of gold, and price movements are calculated in increments of $0.10. When the prices rise or fall (called a ‘tick’), this impacts the final value of your contract. You’ll need a minimum of $500-$1,000 in your bank account to open a futures contract with a broker.
  • ETFs and Stock Market Trades – Trusts are another method for daily investors. The trust trades on the stock market and holds physical gold in reserve. Contrary to the method described above, you would buy shares (usually by hundreds) whose price fluctuates in increments of 0.01$. An organism such as the SPDR Gold Trust trades with 1/10th of the gold’s actual value; for instance, if standard gold futures trade at $2,000, the trust will do that at roughly $200. If you’re going for this option, you will need a balance of at least $25,000 in your account.

Long-term investment opportunities

There are different ways to invest in gold for long-term periods. This will shield you from the volatility of the stock market and other complex financial wizardries. Of course, each option has its pros and cons, but buying gold is usually a guarantee to see a return on your initial capital.

You can buy high-quality jewelry which often comes at a steep price, but is easy to acquire. Also, purchasing physical gold in the form of, bars, and coins are considered safe investments for the future. Last but not least, acquiring gold certificates from companies who own gold can be a rewarding, yet risky option.

All in all, gold (physical or non-physical) remains one of the safest and most profitable investment solutions nowadays. Whether you want immediate profits or if you’re looking for a way to secure your money in time, buying gold is a great option to take advantage of the stock market and insure yourself against systemic crises, inflation, or currency devaluation.

Annika Bansal

Annika "The Chick Geek" is the founder of Small Business Sense shares small business ideas, tips and resources for independent Entrepreneurs and Small Business owners.