Gold is favored by governments around the world for its stable monetary value and has always been regarded as a "quasi-currency" with a status equivalent to a country's foreign exchange and national debt. Looking at the proportion of foreign exchange reserves held by various governments, gold reserves are still a relatively important component, which directly reflects a country's ability to repay its external debts. Because currencies may depreciate due to a variety of factors, gold has a wide demand in the liquidity market due to its value preservation and its status as an internationally recognized trading medium.
This article will introduce five ways to invest in gold, as well as the costs, advantages and disadvantages of each method.
When war breaks out or international political turmoil occurs, local or world economic development will face recession, and the currency may not be trusted by the market. At this time, the importance of gold will be revealed, because gold is an internationally recognized trading medium, and its safe-haven properties will cause the price of gold to rise.
The currency in circulation on the market is mainly paper money and coins, but their value does not increase over time. Instead, prices are more likely to increase with inflation. Currency is facing depreciation or damage without being noticed, which reduces purchasing power. For example, 100 yuan could buy 5 sandwiches, but after inflation, it may only be enough to buy 3. Therefore, holding currency alone is not a long-term solution. On the contrary, gold, as the traditional "safe haven for funds", can not only protect wealth assets from the ravages of time or war, but can also be passed on to future generations. It is a true "heirloom".
Although the era of the gold standard has ended in many countries around the world, there has always been a stable demand for gold. In addition, many developing countries have also joined the purchasing group in recent years, which has also pushed up the demand for gold. Take India as an example. India will buy a lot of gold every October ( the country's traditional wedding banquet ) . Another major demand country is China, whose love for gold bars and gold jewelry is also obvious.
It takes a very long time for a gold mine to be able to produce gold, usually more than a few years. Under the premise that things are scarce and valuable, the price of gold has always been high.
Gold has always been negatively correlated with stocks or other risky assets. When the stock index falls, gold usually rises. Although the correlation between the two is a bit abnormal recently, in fact, the risk nature of stocks and the safe-haven nature of gold have always been in conflict. If investors buy both in their investment portfolios at the same time, it will reduce the impact of external risks on asset price fluctuations.
ETF , also known as index stock fund, is a good choice in recent years. In China, you only need a stock account to buy gold ETF , which can save the price difference when buying and selling in a silver shop, and only need to pay very low taxes. However, because it is a kind of fund, it must be operated by professional managers, so a management fee will be charged. If you open an account with a US securities firm to buy US ETF , you must also pay attention to the exchange rate difference. The rest is roughly the same as in China, but there are more regulations prohibiting short-term trading. If you trade frequently, there may be some restrictions, for example: you must wait until the delivery before making the next transaction.
| ETF Categories | cost |
| Domestic gold ETF | Management fee + handling fee + transaction tax |
| US Stock Gold ETF | Management fee + handling fee + currency exchange fee |
Advantages: simple transactions, good trading liquidity, no bid-ask spread, long-term investment Disadvantages: target selection, management fees, exchange rate risk
CFD , also known as Contract for Difference, is a form of speculative trading in the financial market. It does not require the purchase of any real assets, but only requires the deposit of margin to guarantee the possible profit and loss of the operation, and the operation mode is to amplify the leverage effect. Before the emergence of CFD, commodities on international exchanges were only open to investors with large amounts of funds. It was not until the emergence of CFD that investors with less funds were able to participate in the same financial market. The characteristic of gold CFD is the use of margin trading, which not only has low transaction costs, but is also one of the only two categories of gold investment that can be frequently operated in short-term long and short positions. In terms of cost, CFD will have the spread between buying and selling and the interest fee for holding positions overnight.
Advantages: low transaction costs, can use leverage to multiply returns, suitable for short-term long and short operations Disadvantages: not suitable for long-term holding ( need to charge overnight interest ) , leveraged trading increases risk
The UACTCTK trading platform provides a variety of CFD trading products such as gold and foreign exchange . You can open an account on the MT5 platform to trade within a few minutes. It also provides a simulated trading account for novice investors to practice trading skills.
Gold futures and gold CFDs share the advantages of margin trading, short-term long and short frequent operations, and low transaction costs. However, because it is a margin trading model, it also has the effect of amplifying leverage operations, which is not suitable for novices to participate. Unlike CFDs , futures have an expiration date, so you need to re-purchase the next contract to continue holding. Note that futures are contract-based, so an additional handling fee and transaction tax will be charged, but no overnight interest and spread will be charged.
Advantages: Low transaction costs, suitable for short-term long and short operations Disadvantages: Leveraged trading is not suitable for novices, transaction taxes and fees are charged
Gold bars issued by Swiss banks
Physical gold is suitable for conservative investors, because the public's understanding of physical gold is mainly based on common gold jewelry and commemorative coins in daily life. Although these can be purchased in jewelry stores and shopping malls, most of them have no investment value. The real investment value is that banks will collect gold bars and gold coins, which have fixed specifications. Among them, gold bars are the more common trading units, but they are difficult to see and buy at millions of dollars. It should be noted that because there are many entities that issue gold bars and gold coins, it is recommended to choose institutions that are more internationally accepted to buy.
Advantages: physical transactions are possible, no management fees Disadvantages: high unit price, most of the gold ornaments on the market have no investment value
Gold passbooks are also called "paper gold". They are a common choice for many people to invest and hedge against risks. However, it should be noted that although it is a passbook, it does not have interest. The purchase method is that investors first open a gold passbook account at a bank and entrust the bank to purchase gold in a single or regular payment. The price is mainly based on the current gold passbook price. When a certain amount of money is accumulated, gold bars can be withdrawn. However, since the delivery fee and the buying and selling price difference need to be paid when withdrawing, it is not recommended to use gold passbooks for short-term purchases and sales or convert them into physical gold.
Advantages: can be exchanged for physical gold bars, suitable for long-term investment Disadvantages: not suitable for short-term in and out, exchange rate risk, need to open an account at the counter, no interest
All financial products traded on margin carry a high degree of risk to your capital. They are not suited to all investors and you can lose more than your initial deposit. Please ensure that you fully understand the risks involved, and seek independent advice if necessary.