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The Golden Future - Investing in Gold

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  • The Golden Future - Investing in Gold

    Trading in gold has now become one of my main activities as a result of the changing economy. Gold is a precious metal and has been considered the primary store of wealth during inflationary periods throughout history. The importance of gold can not be underestimated because when people stop trusting paper currency they switch to buying precious metals such as gold and silver, therefore creating the high demand and profitable trading opportunities that we are now witnessing.

    We have experienced a dramatic increase in the price of gold that can be directly related back to the uncertainty in the global economy. From July 2009 to November 2009, the price of gold has increased a massive $240 USD (approx.) per ounce over this short period. The gold market is now showing a strong upward trend, making this the perfect time to start learning and becoming involved with this highly liquid and dynamic market.

    The most utilised methods of accessing gold trading opportunities are either directly investing in speculative gold stocks or trading the gold futures market. I have been promoting new gold floats listing on the Australian Securities Exchange (ASX), as this method is the simplest way to gain exposure to the gold sector. It has become very obvious that there is a strong demand for gold because there are now a considerable number of new gold explorers listing on the ASX. I have been raising investment capital for gold miners, and I have seen new found enthusiasm from my client-base similar to that of other past boom markets.

    Investing in a new share float is easy, but you will need a full service broker. The reason why I say use a full service broker instead of a discounter is because you need a "firm allocation" to secure your place in any high demand new public offering. Top quality new share floats are hard and sometimes impossible to obtain from a broker unless you have a previous relationship, and they have available stock. Full service brokers are in the business of obtaining firm allocations, and developing a continuous business relationship with their contacts and existing client-base. You do not pay any fees when purchasing shares in a new float with a full service broker because they are paid by the issuer, which is the reason that you do not need a discounter. The fees are fully disclosed in the prospectus, and your broker must be a holder of an Australian Financial Services Licence to deal in securities for retail clients.

    The other way to trade gold is by using gold futures contracts. Trading futures is the most efficient way to participate in further gold price increases, while avoiding the possible pitfalls of owning a junior gold explorer, or being exposed to the boardroom decisions of any individual gold producer. The ease of being able to buy and sell the gold futures contract, in a highly liquid and regulated market, makes this method the most attractive to traders.

    Gold futures are exchangeable standardised contracts, used to buy or sell a fixed quantity and quality of the underlying commodity. Futures contracts can be broken by simply offsetting the transaction. For example, if you buy one futures contract to open then you sell one futures contract to close that market position, similar to trading blue chip shares. It is an easy process, and there are several full service Australian futures brokers that can help you place your trades.

    The standard futures contract, for gold, is 100 troy ounces in size and is valued at $10 USD per one tick move, with the tick size being 10 cent. For example, if the gold price was to move from $1175.50 to $1176.50 then that would result in a $100 USD profit per contract to the long-side trader. Alternatively, if the client traded five contracts using the above example then they would have made a $500 USD profit from the $1 USD upward price movement.

    The current margin for a single gold contract is around $4,850 AUD at present. The margin is basically a deposit, and is the amount of funds required to open a position. The trader gains leverage by taking positions using margin, with no interest costs unlike margin lending. The margin method used in futures and the margin lending method used in equities are two completely separate financial processes and are unrelated.

    Gold trades via open outcry from 9:00 AM until 2:30 PM, and the electronic session is from 6:00 PM until 5:15 PM via the CME Globex trading platform, Sunday through Friday, New York time. There is a break from 5:15 PM until 6:00 PM of 45 minutes between trading days. The market can be accessed, day or night, by using the services of any local futures broker.

    If you wish to potentially profit from trading the gold market, then this is the best time to start learning and becoming involved with this lucrative investment sector. Due to the changing global economy, gold should continue trending, and with the abundance of free information available on the internet there is no reason for any investor to physically own gold when there are opportunities to trade gold futures and publicly listed gold shares.

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    "Step into the arena and hold on to your hat. Don't get discouraged if you don't make 8 trillion dollars in your first month. Trading is not a get rich quick scheme. Realize that trading is a skill and just like any other skill it takes time to learn. Have convictions in your decisions in life and trading. Ignore the comments and "advice" of those that have never traded a day in their life."

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    Good KARMA and positive energy abound.

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  • #2
    Gold has always been my favorite hedge in volatile markets. I went long around the end of October and won big on GLD.


    • #3
      Does anybody know of any good gold stocks?? Do they work the same for hedging purposes?