Gold has often been considered a safe haven investment by many traders. One of the reasons why investing in gold is so popular is because there are many ways you can invest in this commodity. You can buy physical gold in one of its most popular forms – gold bullion, gold biscuits or gold bullion coins. In case you just want to speculate about its price, you can consider trading shares of gold mining companies or exchange traded funds (ETFs) etc.
But arguably the easiest and most convenient way of trading gold is to participate on the spot gold market, using the services of a Forex broker. In this article we’ve outlined five major reasons why trading gold with a Forex broker is the best way to trade this commodity.
This post was provided by Peter Traychev, of LiteForex
1. Portfolio Diversification
Many investors choose gold in order to protect their portfolios against high inflation rates and market volatility. In addition, Forex traders who have become familiar with the financial markets and how to trade currency pairs can consider trading gold as well. With most Forex brokers you can trade two types of gold instruments: XAUUSD (gold against the American dollar) and XAUEUR (gold against Euro). In addition, by opening a live account, you are able to trade a wide range of instruments (currency pairs, precious metals, oil, CFDs on shares, etc.) from a single trading account.
2. Limited Supply
One of the top reasons for the increased interest in gold as an investment is rooted in its limited supply. Gold is used in many ways in our daily lives so there will always be demand for the precious metal. You may be surprised that over two thirds of this demand covers the needs of the jewellery industry and that the greatest consumer in the world is India. This indicates that demand for gold may become even higher in future years due to a steady increase in purchasing power in emerging markets. And since the production of gold is a complex and slow process, many believe that this precious metal will be used and traded over many years.
3. Profit from falling and rising markets
Unlike investing in physical gold, trading gold with a Forex broker allows you to buy and sell it without owning a single ounce. Thus you can catch every small fluctuation in its price movement and make money by both going long or short on gold. All you have to do is place an order online from your account, and then follow your investment.
4. You can use Leverage – Low Initial Investment
When you trade gold with a Forex broker you are allowed to use leverage. It enables you to buy a full value contract by paying only a fraction of the required amount. The maximum size of the leverage depends on each broker and the account type you open. Most brokers offer up to 1:200 leverage or even higher. Although using leverage carries a high degree of risk, it is a powerful tool that can bring you great profits.
5. You can use MT4 or MT5 and all its features
Currently the best and most popular Forex trading platforms are MT4 and MT5. Both versions provide you with a complete set of technical analysis tools and various charts so you can analyze the market and make informed trading decisions. In addition, you can use various order types so that you can limit your losses and maximize your profits.
Overall we’ve outlined five advantages of trading gold with a Forex broker, but there are many others as well. It’s an easy and convenient way to trade gold, because you can do it online 24 hours a day. If you’re now feel ready to trade gold you can do so by opening a demo or real account with a Forex broker.