Is Gold An Ideal Investment in Australia today?

Still considered by many Australian investors as a crucial store of wealth, gold and silver are being traded all over the world on a daily basis. There are several reasons why gold is widely considered today, primarily due to the economic uncertainties since the late 2000s. At the moment, the continuous weakening of the dollar and the Euro zone sovereign debt crisis has resulted to gold futures settling high.

While there are several methods for online gold trading in Australia, one that is preferred by a lot of investors because of its convenience is spot gold trading. Spot gold trading in the Forex market is the best way to enter the financial market especially during these rough economic times when the stocks and real estate are no longer as stable as they used to be. Spot gold trading is traded in an over the counter (OTC) market and is based on supply and demand. Just like in currency trading, market players speculate the global prices of gold. “Spot price” is the price quoted for a metal to be paid for two days after the date of the actual transaction or “settlement date”

If you have been trading currencies, then gold trading shouldn’t be an entirely new game for you. Spot gold trades are conducted pretty much the same way as currency pairs are traded. The only difference is that gold is being traded against the US dollar instead of two currencies trading against one another. Additionally, spot gold can be traded both in long and short positions multiple times throughout the day, given that the market moves rapidly.

Spot gold trading is conducted 24 hours a day between Sunday at 6pm ET to Friday at 5pm ET. While the gold trading market is decentralized, there are major centers around the world for these namely Zurich, London and New York. The liquidity of the market is highest when the European market hours overlap with the New York market. Needless to say, this time is the best one for conducting trades.

Just like in any kind of investments, gold trading comes with risks. Take note that it also makes use of leverage which can result to huge losses as much as it can make substantial returns. With this in mind, Australian traders should take the time to learn the ins and outs of the market before risking a large amount of capital.
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Start Gold trading in Australia in 3 ways

Traders today have a wide variety of instruments to maximize gold trading in Australia. The most obvious way to trade gold is by buying it in its physical form – that is, gold bars and coins. The problem with this however is the storage and costs during transactions, therefore making it a less convenient method.

According to the World Gold Council, the supply of gold from mine production in Australia recently experienced a marginal decline due to the lower grades of gold at older operations.

Now, if you are looking to get started in Australia gold trading, then three of the most popular options today are spot gold, gold futures and gold ETFS.

Spot gold

This is perhaps the simplest and most cost effective way to trade gold online. In spot gold trading, Aussie traders are not required to possess the physical gold. This means that they don’t need to deal with storage and transportation when trading spot gold.

If you have been trading currencies for a while, then spot gold trading won’t be an entirely new concept to you as it pretty much has the same method with currency trading. In spot gold trading, gold is paired with the US dollar wherein Forex, two currencies are paired together.

One thing you should take note however is that a great deal of people fail in spot gold trading mainly because of the improper use of leverage. Remember that while leverage can make substantial returns, it can also create huge losses if not managed the right way.

Gold Futures

The gold futures market is basically the market for gold at a certain date in the future. Gold futures trade on the Commodities Exchange (COMEX) in New York and is also a part of the Chicago Mercantile Exchange (CME) Group. These are primarily designed for quick speculation and hedging. And just like with spot gold trading, futures also make use of leverage.

Gold Exchange Traded Funds (ETFs)

Gold ETFs are traded on the New York Stock Exchange and the NASDAQ. A gold ETF like Gold Bullion Securities Australia works similarly to a mutual fund in that the fund itself purchases the gold and this precious metal is held in the premises of the investment company. Most ETFs require a minimum amount of investment as they are funds that hold the physical gold. The Gold ETFs that are available today include ETFS Gold Test (Ticker symbol SGOL), Powershares DB Gold Fund (ticker symbol DGL), SPDR Spider Gold Trust (ticker symbol GLD) and the iShares COMEX Gold Trust (Ticker symbol IAU). These ETFs can be purchased and sold through an Australian brokerage firm using market orders, limit orders and stop orders.

Many investors turn to gold ETFs as a means of diversifying their asset allocation. And as the Eurozone sovereign debt crisis and the weakening of the dollar continue, the year 2012 may provide different results for the precious metal and cause short gold ETFs to become more in demand.
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