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Gold Trade 101


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Many find themselves drawn to gold options trading as a way to make quick returns on their investments. This guide will help you figure out the basics on how to trade gold.

A gold trade can take many forms. Some of which are complex and are primarily for those well versed in this field. Gold is defined as a commodity and a trade is a buy and sell. If you buy gold futures or trade gold options, in the vast majority of cases you will not take possession. It may be called “gold bullion trading”, but you are not actually ever in possession of any physical gold bullion. This often is a concern to gold bugs and those who are serious about investing in gold.

You will sell the gold options again, hopefully for more than you paid for it. The units (contracts) here are in 100 troy ounces (@$960 per ounce). That comes to a lot of money. The saving grace is that you can buy on margin with many Forex and Monex type systems. Margin is a type of leverage, in which you do not need to put the entire purchase price down. In fact very little is needed to put down, which cuts both ways, a big gain or a big loss, which is accompanied by a margin call for more money

In a gold trade with gold at $1,000 an ounce with a purchase of 100 ounces, a rise of .10 is a considerable gain. You can sell immediately, pay your commission and be content. It also works the other way. A trade might go down in a day resulting in a loss, but you are assuming over the next week it will rise considerably. You then have a loss, but in a week you could recoup the losses many times over. Gold trading is not for the weak of heart, and it is not a long term investment strategy. In the short to mid term though trading gold options and futures can be quite lucrative. Especially when the economic climate tends towards panic and fear, gold stocks and options tend to go up.

The gold trade also encompasses other transactions such as purchases of coins and bars or other forms of gold bullion. Gold etfs, gold stocks, gold mining stocks are other ways to make a short-mid term gold investment. In most of these cases an investor is not able to take possession of their gold in this case, and all they have is a piece of paper and a few 1’s and 0’s with their name attached to it. When you think gold will fall you can sell your gold options and take your profit.

You may buy or sell gold stocks or equities depending upon what you assume the future price of gold might be. Remember everyone has a different opinion and just because the individual might be wearing an expensive suit and look well in it does not make him a sear on future gold prices. Use your common sense, educate yourself on the current state of the economy and the future of gold commodities, and get out there and trade gold!

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