Trade Gold with a dollar. Table of Contents

Investing in Gold has never been easier

Gold instead of the historical analog of money has long been a way to make this very money solely on trust in the precious metal. Let us recall the basic schemes of how you can profitably invest in gold, and at the same time practically not lose capital on speculation.

Today, investing in gold is available to each of us, and the requirements for the level of capital and investment experience are very loyal. Before buying gold, investments should, as they say in the market, “determine the horizon”: the investor must clearly understand what (and when!) He expects profit, and what risks he considers normal for himself. In accordance with our expectations, we choose an action plan. In fact, you can buy either physical metal or its investment (“paper” or electronic) analogue.

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What makes Gold different from other precious metals?

How to invest in gold in the form of metal

Let’s start with the most affordable options.

Bank unallocated metal accounts (OMS)
An ordinary deposit, on which grams of precious metals (Au, Ag, Pt) are taken into account, a paper agreement serves as a confirmation of the investment. The price is set by the bank (below the speculative market). You can get your hands on real metal, but you have to take taxes into account. So you can invest in gold only for the long term. Advantage: no commissions for the purchase of gold, account maintenance, but guarantees and insurance of such deposits are usually problematic.
Buying gold coins
Investment or collectible coins are physically transferred and stored by the buyer (a security issue immediately arises) and can be redeemed by credit or banking institutions. The price is converted at the market rate. Banks buy investment coins at a reduced rate, the cost of collectible coins is higher due to their artistic value. If there is demand for several years, such a coin can increase in price several times, so this is an option for a long-term investment with an unsecured profit.
Investment in gold bullion
Banking structures (with a license) sell standard high-grade metal ingots with the issuance of an official certificate. Storage security is a buyer’s concern. This method is considered less profitable due to the exchange rate difference on the purchase/sale and taxes, therefore it does not give a stable profit. Most often it is used only for accumulation.
Buying jewelry
Whether to invest in gold in this form is a consumer rather than an investment question. Even if you purchase products made of pure gold and not an alloy, the primary cost is overstated due to production costs, and it is impossible to sell it at an adequate price. Such investments in gold can be earned only if the product is of particular artistic or historical value, otherwise, the jewelry can be sold only by weight as scrap metal.
Gold as a speculation tool
Banks, investment funds, stock, and commodity exchanges offer a huge range of investment assets, which, in fact, create a market in which both real consumers and speculators earn money.
Exchange operations with gold
Investing in gold like conventional margin trading – with leverage, commission spreads in the form of stocks, futures contracts, indices and other derivatives – is the most popular, most profitable and most risky way of investing. Trading lot in the gold is expensive, but various “democratic” options, such as mini-futures or cent trading accounts, combined with leverage, allow even beginners to try their hand. This method of investing in gold is not recommended without successful trading experience on less speculative assets.
Mutual funds and ETFs
Money can be invested in gold through mutual funds or their exchange-traded counterparts Exchange Traded Fund (ETF). Management companies charge a fee for the management of mutual funds (5-10% per year of the amount of assets), and also reserve part of the funds for an urgent return to clients. ETFs are more profitable than mutual funds, although they have all the standard exchange risks, but for such operations, the total losses on commissions usually do not exceed 1-2%.
Buying shares in gold mining companies
It is assumed that dividends should compensate for losses from price declines: the investor can expect to receive a profit regardless of the market price of the raw material. Such operations can be profitable only when investing large amounts, because the interest, and most importantly, the stability of such income is rather doubtful. Making a decision requires professional analysis of the market and the industry, without experience trading stocks is not recommended.

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So is it worth investing in gold?

Profit/loss on gold depends on pricing in the commodity markets, investor expectations, and central bank actions. Do not think that gold always rises in price: it is a commodity that, in the context of a slowdown in the economy, trade wars, and other restrictions, is losing demand and, accordingly, the price.

Gold is always bought up as a defensive asset during a crisis, but precisely for backing up and insuring risks, and not for quick speculation. In addition, rush demand quickly raises the price, sometimes to an irrational level that is not profitable for investment. It is necessary to perceive any investment in gold as strategic – speculators in the precious metals market can survive only if they have millions of capital.

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What affects Gold’s market price?

The central banks of Europe decided that collective international control over gold reserves did not meet the requirements of the modern market. Is it worth investing in gold now and are there additional risks?

Investments in gold have always attracted with their profitability, but fundamental analysis for them is rather complicated, and technical analysis, as a rule, does not keep pace with speculators. The news regarding the regulation of the precious metals market has a strong impact on all short-term assets involving gold. One of these events is scheduled for September 2019.

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When was the Gold standard price established?

Central Bank Agreement on Gold

Recall: the term of the CBGA (Central Bank Gold Agreemen) “gold pact” – an agreement between 21 Central Banks of Europe to control the sale of gold and foreign exchange reserves, is coming to an end. The agreement was signed in Washington in 1999 (since then it has been extended three times) and provided for the coordination of legislative and financial measures in order to prevent a sharp drop in prices.

The cartel, which controls more than half of the official gold reserves, at least suspends its work – the ECB has already announced that the next prolongation of the agreement is not planned. For everyone who wants to invest in gold, there is a reason to carefully study the situation.

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Investment in gold after the pact was canceled

Analysts of the World Gold Council believe that over 20 years the gold market has structurally changed, received consistently high liquidity and a wide range of investors, and also provided a 5-fold increase in prices – from $ 260 to $ 1,420. The risk of speculative mass sales is minimal. It is believed that now almost ideal conditions have developed for a long-term rise in gold prices: the majority of the Central Bank is softening monetary incentives, and the yields on US government bonds, which are usually used as an alternative to gold, have dropped to the levels of current inflation (about 2% per annum) and do not give real profit.

Those who expect to invest profitably in gold, when analyzing the situation after the expiration of the agreement, should take into account that can be used:

When do investors start selling Gold in the market?

Investment in gold as a reserve of payments

Some European countries that regularly experience strong budget deficits in relation to GDP and at the same time have GDP growth at the level of the world average dynamics, for example, Italy, France, Spain, may periodically throw gold into the market from reserves to ensure spending and payments on government bonds … The volume of such sales is now unregulated, which may lead to a short-term, but rather strong drop in prices.

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Buying gold as insurance against risks

Countries that are steadily increasing their gold and foreign exchange reserves (Russia, China, Turkey, Kazakhstan) are stepping up the purchase of all types of “gold” assets, including those volumes that will be sold by European central banks. China is especially dangerous with “gold traps”, which, as part of a trade war, is actively getting rid of the US dollar and accumulating gold as insurance against sanctions, in particular, from the arrest of its displaced capital. Buying traditionally causes excitement and speculative growth of quotations.

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Accumulation of gold as a reserve for manipulation

Investments in gold are considered not only highly liquid, but politically neutral, and avoid the accumulation of “problem” currencies in reserves. Diversification of reserves in gold is actively used as a tool to reduce the trade surplus, as well as to exert political and financial pressure. In this regard, China is also dangerous: earlier provinces and companies were actively borrowing in USD (only in 2019, debts of $ 1.2 trillion should be rolled over) and short-term sales of large lots of gold are used regularly to curb the growth of the dollar. The pressure from China will only increase, in addition, Japan is constantly using purchases of gold on the American grounds to reduce the trade surplus with the United States.The degree of political manipulation of gold is steadily increasing and the market is obliged to react with rising prices.

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Invest in Gold today

It is difficult to predict the impact of central banks on gold quotes, but the refusal to regulate sales from the reserves of the market will definitely not cause a catastrophe. None of the central banks involved in the pact plans to sell critical volumes.

We work according to the usual methods, but in order to decide whether to invest even a small capital in gold, we strongly recommend that you constantly analyze the Asian market. In any case, keep a close eye on the gold asset market after September 26 – within a month it will tell you where to adjust your strategy.

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