How Should Beginners Invest in Gold?
As we’ve seen there are several ways to invest in gold, and for beginners, each of these requires some homework:
The most direct way to own gold is through the physical purchase of bars and coins. The most critical factor for beginners is to find a reliable bullion dealer for their physical purchases:
Reputation: There are many online resources for conducting due diligence. Make sure your bullion dealer has an unblemished track record and positive feedback from customers.
Client References: Ask for references from clients and speak to them about their purchasing experiences.
Compare Prices: A reputable dealer will charge an equitable price for coins and bars. This price will vary by item, but with a little comparison shopping, you can make sure you are paying a fair price. Bear in mind, physical gold prices can vary from futures or ETF prices.
A critical component of ETF investing is the fees funds charges to clients. Funds incur costs such as bullion storage in the case of physical gold or trading costs in the case of ETFs that invest in gold futures.
Precious metals equities are not only affected by the price of gold, but also by the vagaries of the stock market. However, gold traders can protect themselves by investing in companies with successful track records and experienced management teams.
Beginners purchasing gold through CFDs should first and foremost make sure they are working with a broker with a good reputation. Investing in CFDs does not require the trader to pay for gold storage or roll futures contracts forward every month. Traders also don’t have to worry about getting the timing and size of markets move correct in order to profit on their trades.
What Are Some Gold Trading Basics?
Here are a few tips traders may want to keep in mind when trading gold. However, these tips should not be construed as investment advice. The individual must determine on their own what’s right for their unique situations:
A popular reason for holding gold is as a safe haven or insurance for your portfolio. Therefore, consider how much exposure you want to have.
Some traders avoid physical gold because it’s easy to gain exposure through stocks or ETFs. However, if insurance against a financial debacle is your reason for holding gold, then it may make sense to have a portion of your investment in physical gold.
Probably the single most important data new traders should focus on is the dollar and the factors that move the currency markets. These factors are likely to have the biggest effects on gold prices.
Be a Contrarian:
Perhaps more than any other asset, gold prices are often subject to a herd mentality. When sentiment for gold is at its worst, it often represents a good time to buy. Similarly, when the markets become too bullish about gold, it often means it’s time to sell.
Take a long-term view:
Gold is a volatile asset and can be subject to some wild price swings. At the same time, the metal has a long trading history. Traders may want to pay attention to key long-term support and resistance levels for clues about where the metal is heading next.