Diversifying your investment portfolio has never been as straightforward as it is today, with online gold Forex trading. Gold trading has always provided the advantage of letting you benefit from the gold market without physically owning any gold for yourself. Today, the prospect of the internet and digital technology has made it even better.
You can literally buy and sell gold online anytime, anywhere, and because you’re doing so without actually owning gold, you save on costs otherwise incurred in insuring and storing the asset.
It sounds too easy to be true, but like any worthwhile investment, you need to be well-acquainted with online Forex trading before you jump in and reap results. This guide is intended for beginners to fully grasp the essentials of gold trading online. It also points out fairly common and useful tips concerning the market.
Forex Trading 101
Forex simply means “foreign exchange,” referring to the trading of currencies in the foreign exchange market. Trading online does not involve the switching of hands of any physical gold. What happens instead is you use a broker to facilitate the online gold trading in your place. You start by opening an account with your preferred online broker and deposit an amount of money corresponding to the value of gold you would like to buy.
You can immediately start trading gold online using your online broker’s platform once your account is open. Your specific broker may have some different features from others, but the underlying concept remains the same, and they all trade within the same international markets.
It would be best to familiarize yourself as soon as possible with the usage and features of your broker’s trading platform and systems. Brokers usually offer helpful tools to give you an edge in trading.
Tips for Buying Gold Online
There are always some gold trading fundamentals that beginners should be well aware of — let’s start with buying gold.
Avoid purchasing too much gold
Gold is said to be a safe haven asset — it retains at least some of its value even if other asset classes suffer a sharp decline in their value. This means that you need to assess the probability of the value of equities, bonds, and other assets falling as well before you buy too much gold to compensate. A lot of traders hold gold as a form of insurance against more volatile asset crashes.
Realistically speaking, though, gold holdings actually provide no income. Furthermore, their prices can be volatile, too. Historically, the value of gold holds best when equities fail. Keep these in mind when deciding to buy gold.
GoldCore, a company that provides physical gold to investors, recommends that you should only keep 5% of your portfolio in gold holdings. They go on to advise that more conservative investors should reduce this amount to 3%. In line with historical trends, GoldCore also notes that higher-risk clientele whose portfolios have more equities also have higher amounts of gold to offset any catastrophic market shifts that could affect the former.
Think about using gold exchange-traded funds (ETF)
There are gold ETF providers like ETF Securities and iShares that offer listed tracker funds backed by physical gold. You can buy and sell shares daily. Other exchange-traded assets tend to rely on futures contracts instead of actual, physical commodities. ETFs cost an annual management fee of about 0.4%.
ETFs are a quick, easy way to get more exposure to gold, but these are typically used for short-term strategies.
Consider actually holding physical gold
ETFs backed by physical gold have a slight edge, but you should also consider actually holding physical gold for yourself. You can seek out specialist providers who buy physical gold and store it either in nominee accounts or vaults for investors. This gives you the added security that the gold is held in your name.
GoldCore as well as a company called BullionVault offer this service.
Be warned, though: the upfront costs of holding physical gold may be prohibitive especially if you’re starting out, and take note that it would be difficult to sell the gold quickly. GoldCore charges a 2% initial fee and then 1% of the gold’s sales. There are, however, no annual storage costs. BullionVault charges 0.8% upfront and an annual storage fee of 0.12%.
In the long run — about six years — it actually becomes cheaper to hold physical gold with a company with rates like GoldCore than a gold ETF, due to ongoing annual charges. BullionVault, on the other hand, also notes that their service is more cost-efficient than a gold ETF on positions over $9,400.
Perform Your Due Diligence
Any form of Forex trading requires due diligence, so make sure you do your homework and perform gold market research whenever making your decisions.
Brokers and financial websites also publish gold trading news regularly, as well as other important information regarding the markets you will be trading in. Keep an eye out for trends, patterns, and expert predictions.
These are just the bare fundamentals of gold trading online. There remains a wealth of information and intermediate as well as advanced buying and selling tips for you to learn.