Contract for difference (CFD) trading is one of the latest forms of online investing to become popular. You can earn money from assets by successfully predicting price movements. One of the greatest advantages of this type of investment is that there are hundreds of assets to choose from. However, this choice can make it difficult to understand when to trade a specific asset. Gold is a common selection for new investors, because it has had a long history of responding consistently to recurring market conditions. Here are some reasons to trade Gold as a starting asset, and why to work with it as a CFD instead of using a traditional commodities exchange.
Is Gold a Good Investment?
Gold has some distinct advantages in comparison to other tradeable instruments. From ancient times, people have collected this precious metal for its beauty, and it has become a portable and liquid form of wealth. Especially in regions where war or economic uncertainty has made the local currency unstable, it can be a good way to protect your earnings. It is easy to mold into different forms. For example, you can use this commodity to make jewelry or stamp it into coins which can then be carried around conveniently. Gold can also be exchanged for money nearly anywhere, because of its universal acceptance as a valuable item. Anything that retains such a high level of appreciation across millennia is almost by definition a good investment.
Why Do Gold Prices Fluctuate?
Although Gold has been considered valuable since it was first discovered, certain events can cause its price to go up or down. Sometimes, socio-political or environmental changes can cause unexpected behavior in fiat currencies such as the Dollar, Euro, and Pound. This is because the value a regional currency is based on a mix of supply and demand, mostly as created by their affiliated central banks, along with the market’s perception of its buying power. Since the 1970s, USD, EUR, and GBP no longer have anything held in reserve to act as an intrinsic measurement of value.
Gold, on the other hand, is a physical good and which means that even if the current economic system collapses, it will continue to be useful as a form of payment. Therefore, the price of Gold is likely to go up in times where economic collapse is seen as a possibility. Meanwhile, the commodity sees a loss of demand when the global situation seems calmer.
How to Trade Gold
Before the development of CFD trading software, investors who wanted to add Gold to their portfolios needed to use a commodities exchange broker. This meant paying high commissions and working with the time frames of a third party, instead of choosing to trade when and where you wanted. Leverage for trades through these commissions was also uncommon, so it was primarily an activity set aside for rich individuals.
Thanks to new technology, Gold is now available for trading 24 hours a day while the CFD market is in session, which runs from Sunday at 5pm EST to Friday at 5pm EST. The sheer numbers of investors worldwide means that there are almost always buyers and sellers offering the opposite side of your trade, no matter when placing an order is convenient for you. CFD brokers also offer trading on margin, meaning that you don’t have to put up the full value of your trade in order to place an order, although this does introduce an additional layer of risk.
Gold is a great choice for new investors because you can easily see the patterns that connect market news to changes in its value. CFD trading is the best way to take advantage of this commodity’s volatility thanks to low fees, increased trading opportunities, and the ability to trade on margin.