How to Short Gold When Gold Prices Drop
If you believe that the price of gold is going to drop and are looking to maximize your returns as a gold trader, then you will want to consider shorting gold via an online forex trading platform. Gold has experienced a dramatic upward climb in the last decade. However, there are some investors out there that believe that the Price of gold has run its course. After all, how many other investments have multiplied over 5 times in value in the last ten years? Take a Look at the Following Chart which illustrates Gold’s impressive rise.
Why Gold Short?
Most novice traders and gold investors only think in a one dimensional framework of thought. They think “Buy Gold, Buy Gold”. That is because the media and television commercials tell us to buy gold because it is a “safe haven” and a “store of value” and the best form of currency because it has intrinsic value as opposed to fiat currencies. There is nothing wrong with these ideas, however such type of thinking will limit your profit potential because you will miss out on any profit when gold prices collapse as a result of shrinking demand or reduced popularity in the asset. Even if it is only as a result of seasonal gold price fluctuations. Often times, more money can be made when an investment drops in price, because it takes longer to climb than it does to fall. The Financial Meltdown in 2008 and the rapid decline in stock prices was a great example of this. Therefore, it is during times of gold price volatility that a trader should consider being gold short and not just long the price of gold.
Short Gold ETF or Shorting Gold via a Forex Platform?
Sure you can profit if gold drops and you are short gold ETF’s, however there is even a larger potential reward by shorting gold via a forex platform. The reason for this is the amount of leverage that is made available to a forex gold trader. In forex, gold is traded in the same way other currency pairs are traded and many forex brokers will offer online trading platforms where you can trade with up to 100 times leverage or buying power. That means for every $100 you would be able to trade up to $10,000 worth of gold. It is important to understand that with the greater potential reward, also comes greater potential risks. Take the time to understand those risks before attempting to short gold with a forex platform. It is highly advised to use a free demo account before you even think of risking your own money.