Differences between Investing vs Trading
Differences between Investing vs Trading
Gold has been popular as a commodity for many years. This is largely due to its relative lack of price volatility, high level of liquidity and the perception of gold as being a proven store of value.
Unlike most other commodities, supply and demand isn’t the biggest driver in the gold price. Once gold has been mined, it isn’t going to disappear and little of it is consumed, so the amount of metal in the world continues to climb. Many societies throughout human history have turned to gold as the ideal metal for producing coins, although gold coins are rare in modern times.
The gold standard has played a huge role in monetary systems over the years, with many countries pegging their currencies against the value of this metal. Numerous nations have also stored vast quantities of the precious metal, as a way of hedging against possible rises in inflation or currency devaluation. All of these factors mean that the price of gold is one of the most keenly observed figures in the financial markets.
Gold and other commodities
The prices of commodities such as gold, oil,oil brent, natgas, silver, and platinum are often seen as a barometer of economic activity. When the economy is doing well, commodities tend to rise in value, while weak economic conditions can lead to a decline in prices. However, there is also a strong relationship between the prices of different commodities. For example, gold and silver are both considered safe-haven assets, and so their prices tend to move in the same direction. Similarly, crude oil and natgas are both essential inputs for industry, so their prices can also be correlated.
Platinum and palladium, on the other hand, are used in jewelry and vehicle manufacturing respectively, so their prices may not always move in tandem. Understanding the relationships between commodities can help investors to make more informed decisions about where to allocate their capital.
The price of gold is generally steady, which is why it’s so widely used as a safe haven and to diversify investments. Yet, it can also suffer troughs and peaks, just like any other kind of investment. In many cases, the factors that affect the value of gold are different from those that influence stocks and other commodities, giving it an important role to play in diversification strategies.
One of the interesting aspects of the gold price is that it often rises in times of economic turmoil, as more people turn to what they see as a safe, tangible type of investment. This helps to explain sharp increases such as that seen in 1980 when military conflict in Afghanistan followed on from a period of inflation and other negative factors.
About 2,500 tonnes of gold are produced every year, but the amount of the metal mined doesn’t have a huge impact on the price. Instead, this largely comes down to market sentiment and the underlying economic situation.
Gold bullion bars and coins are the easiest type of investment in this metal to understand. They can be purchased simply online and the investor doesn’t even need to physically store them.
Some of the largest exchange-traded funds in the world invest in gold. While this may be seen as a more convenient way of investing in the metal, it also introduces new risks that turn this into a more complex way of putting trading gold.
Gold futures and options can be traded online, giving another convenient method of investing. These instruments are based on the future gold price, and are often used for hedging purposes.
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* The spreads provided are a reflection of the time-weighted average. Though Skilling attempts to provide competitive spreads during all trading hours, clients should note that these may vary and are susceptible to underlying market conditions. The above is provided for indicative purposes only. Clients are advised to check important news announcements on our Economic Calendar, which may result in the widening of spreads, amongst other instances.
The above spreads are applicable under normal trading conditions. Skilling has the right to amend the above spreads according to market conditions as per the 'Terms and Conditions'.
Why Trade [[data.name]]
Make the most of price fluctuations - no matter what direction the price swings and without the restrictions that come with owning the underlying asset.