Gold has maintained its steep price rise in recent weeks amidst speculations about the increasing debt crises from Greece to United States contributing in making the metal as one of the safe haven assets to purchase. According to a latest report published by the World Gold council, the metal had outperformed all major commodity, bond and equity indices across the globe in all three quarters of the 2013-14 and stands a great chance to make it a clean sweep. While some investors are of the opinion that this price rise is temporary, others reckon the price with rise even further. Doug Mears’s Leland Gold predicts that the metal will touch $2500 an ounce next year. But, how should potential investors get exposure? Read below 4 effective tips for trading gold:
Never buy too much: Gold is thought to be a safe asset that will always retain a big part of its value even if every other asset classes are depreciating in value. Therefore, people mostly hold gold as insurance out of the belief that the world economy will combust. However, it’s to be remembered that gold holdings provide zero income and gold price can also be volatile, especially when equities are falling. That’s the only reason why most of the leading providers of physical gold to the investors advices investors not to invest more than 3%-5% in gold.
Consider Using Gold ETF: Gold ETF’s are a simple way of gaining exposure to gold. The ETF securities offers listed tracker funds backed by physical gold, contrary to the other major exchange-marketed commodities, which mostly tend to follow futures contract. Moreover, using Gold ETF’s, gold can be traded daily in return of a nominal management fee that further makes it convenient for the traders.
Hold Physical Gold: The specialist gold providers’ looks to purchase physical gold and accumulate the purchased gold in nominee accounts or vaults- providing them the security of being assured that the purchased gold is effectively held in their names. However, at times it might well be difficult to sell physical gold quickly and adding to it, upfront expenses can also be high. Therefore, over purchasing is again something that traders should always be careful of.
Purchase Gold Miners: This is one of the most widely preferred indirect ways of gaining exposure to golf. Studies and surveys conducted over the past couple of years have clearly revealed that with the share prices of the mining companies going down steeply amid volatility of the equity market, gold miners are enjoying a much better trading prospect compared to the consistent rise in the price of gold. At the same time, investors also need to understand that shares in such mining companies have a risk of being adversely affected by bulk selloff in equities- which is exactly what physical gold protects the traders from.