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How to trade gold

What you need to know to get started

Profile picture of Danni White
by Danni White ConsumerAffairs Research Team
graph showing fluctuation of gold prices

Buying gold can help build a strong portfolio, and gold investors can participate in the market in a number of different ways. Here are some of the most common ways to trade gold.

How to trade gold bullion

The term “bullion” refers to precious metals of a certain quality, usually in the form of bars, ingots or coins. You can purchase gold bullion, store it (at your own location or in a specialized depository) and sell it when you want to cash in. Bullion is often bought and sold through precious metals dealers.

How to trade gold stocks

Stocks are securities that are bought and sold on stock exchanges around the world. Purchasing gold stocks does not mean you’re investing in physical gold assets, though. Instead, you’re purchasing shares of a company that deals in gold in some way. This could mean you’re buying shares of a company that operates a gold mine, for example.

How to trade gold ETFs

Gold exchange-traded funds (ETFs) offer another type of security. Gold ETFs are backed by gold, but like with stocks, you’re not purchasing actual physical gold with these funds. Instead, you are purchasing a collection of gold-related assets. ETFs are flexible and may allow you to get involved with gold investing for less money than with other options.

There are various gold ETFs available to invest in. Compare your options carefully before making a decision about which is right for your investment needs. Costs, risks and other factors play a role in the overall worth of any ETF.

How to trade gold futures

Gold futures are contracts where the buyer agrees to purchase gold for a specific price at a specific point in the future. Buying and selling these at the right times can produce a profit, but there is a fair amount of risk involved. You can buy gold futures on exchanges by working with a stockbroker or an investment advisor.

What is gold trading?

The term “gold trading” refers to speculation and hedging in the gold market. This usually involves buying and selling physical gold or paper assets like gold stocks, ETFs and futures.

Investors may wish to invest in gold because of its value and rarity. However, purchasing gold bullion is inconvenient, and it often comes with storage fees that make it more expensive.

Paper assets let you invest in gold without these concerns. Some people opt to purchase gold stocks, ETFs and futures and hold onto them long term. Others buy and sell quickly, making profits off of small increases in the value of the underlying investment.

How gold trading works

Like with other investments, you want to
buy low and sell high.

Once you decide that you want to trade gold, the next step is determining how you want to go about it. The most common ways to trade gold are buying and selling physical gold, gold stocks, gold futures and gold ETFs. See the descriptions of these practices above for more information.

Once you know what you want to invest in, think about how much you wish to purchase, how much risk you're willing to take on and what type of system to use. Many people choose to invest on their own using online brokerages. Others prefer to let professionals handle the investments for them.

The general aim of gold trading is to buy and sell gold assets on stock exchanges or other platforms to maximize your return on investment. This can involve watching market conditions to know when to sell and when to buy.

Specific gold trading strategies will differ, but it’s important to have a strategy in mind as you’re trading. You should define your ideal price and at what point you want to sell. Take your investment goals into account when creating your strategy, and research market trends to see how your strategy might have fared in the past.

What drives the price of gold?

Gold is one of the most desirable of all precious materials, and its supply is relatively limited. The amount of gold being introduced to the market every year from mining is small in comparison to the amount of gold already being traded.

The price of gold is dependent on many factors, though. For example, gold’s price is still often dependent on demand. In times of economic instability, investors may surge to buy gold, which drives up prices since mines cannot easily introduce more gold to keep up with demand. Other factors that affect the price of gold include:

  • Political crises
  • Central banking policies
  • Inflation (indirectly)

Trading gold successfully requires you to understand these factors and how they impact the value of gold over time.

Gold values often don’t correlate to the stock market.”

Gold values often don’t correlate to the stock market. That’s one reason why gold is a popular investment for hedging against inflation and unrest. When economic conditions become troubling, traditional stocks tend to drop in value. Many investors then move into the gold market.

What’s the best time to buy gold?

It’s better to buy gold when its value is as low as possible. However, gold’s value changes often, and it's up to you to decide when gold’s value has fallen far enough to be worth it.

You might also consider the time of year. Like other types of investments, gold values fluctuate over time and may fit into certain recurring patterns.

For example, early January, March, early April, late June and early July tend to be good times to buy, with early January standing out for its low gold prices. Historically, the price of gold falls during the spring and summer months and rises again in the fall.

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    Bottom line: Should I invest in gold?

    Gold and other precious metals can be smart choices for a properly diversified portfolio, but all investments have some risk. No matter what you’re planning on investing in, it’s critical to consider your personal risk tolerance and your goals for your investments. Research the gold market and pick the right gold investment vehicle for you before you buy.

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    Profile picture of Danni White
    by Danni White ConsumerAffairs Research Team

    As a member of the ConsumerAffairs research team, Danni White is committed to providing valuable resources designed to help consumers make informed purchase decisions. Danni specializes in content strategy and development, with over a decade of professional writing and research experience.