When it comes to trading gold, there are plenty of profits to be made if you chose your investments properly and make sure to properly research the trade before making any decisions. Knowledge of the metal and the market is important to succeeding in every investment that you make. While there will always be the chance of losing some or all of your investment, the more that you known about the trade, the better chance you will have of winning in the end.
The fact is that historically speaking, gold has increased steadily over the years at a rate of 2% per anum. At the same time, the rate of inflation has increased at a rate of nearly 3%. What this means is that the value of gold is constantly rising; just not as fast as inflation is. While you will get more money when you sell the gold years later, the question as to whether or not that money will go as far as it does today will be dependent upon the rate of inflation.
With that said, trading in gold is quite straight forward depending on how you chose to invest. For example, if your plan is to invest in the mining and processing companies which find the gold and melt it into bullion, than your investment will be just as complex as any other form of stock market investment. However, if you plan on investing in the physical metal, then the process is actually fairly straight-forward.
While the price of gold is constantly rising year after year, the prices fluctuate throughout the days, weeks and months of the year. What this means is that there is a potential to make or lose money simply by purchasing gold when the price is low and selling when it is high. Your profit potential will be dependent upon the margin.
In the stock market, margins are usually fairly small which is why many people trading gold, do so on the stock exchange as well as other similar markets. When it comes to bullion or scrap gold, the margin is usually fairly large which means there needs to be a large difference between the price you paid and the price you will see in order to make a profit. The reason for this is that there are many more hands and a lower volume traded on a daily basis.
It is important to remember that when you chose to trade gold on the market, your initial investment does not have to be as great because you have leverage. Leverage is additional buying power that allows you to buy more with less capital. You can use this leverage to invest in gold ETFs, futures and the mining and refining companies.
However, when investing in the physical metal you do not have this leverage. Even if you chose to purchase gold certificates, in most cases you will not have the ability to leverage the purchase of the certificates.
Always remember though, that there will always be a risk associated with any trade so make sure that you can afford to lose your investment before you make a single trade. Also make sure to learn as much as you can because a well-informed decision can mean the difference between making a profit or losing everything.Dan Craig