Trading Gold Without Owning it - An Important Commodity

Gold is one of the most mysterious commodities in the market. Unlike corn, copper, and orange juice which have normal uses, gold does not seem to have ‘normal’ usage apart from making ornaments. However, gold is one of the most important commodities in the market today. Its movement is tracked carefully by analysts and traders. In his August market outlook, famed investor and bond king, Bill Gross advises investors to be heavily invested in gold. Gold’s only value comes from appreciation because it does not pay any dividends and it cannot offer buybacks as shares do. In this article, I will look at a number of ways of trading gold without owning the actual commodity.

#1 - Online Trading

The first way of trading gold without owning the actual commodity is through online trading. There are many online trading companies which provide traders an opportunity to trade in gold. This gold is usually in the form of contracts for difference (CFD). These platforms usually provide the trader with live data from the leading exchanges. They also provide other tools that traders can use to perform analysis to make the decision on the best decision to make. If you don’t want to own the real physical gold, this is your best way to do it.

#2 - Trading Gold Mining Companies

Another method to use if you are trading gold without owning the physical commodity is trading the gold mining companies. There are hundreds of listed gold mining in the major exchanges that you can take advantage of. These companies move up and down because of a number of factors. A leading factor is on the price of gold. If the gold price declines, chances are that the gold mining companies will also move down. This is simply because they will sell their gold at a lower price. If gold price moves up, chances are that the companies will move higher. Some of the key gold mining companies to consider are: Anglo Gold, Gold Fields, Kinross Gold Corporation, and I am Gold among others.

#3 - Gold Funds

Another strategy to use if you are trading gold without owning physical gold is the use of gold funds. There are many gold funds that one can chose from especially if they are trading in the United States. For instance, there are many gold backed Exchange Traded Funds (ETF) that one can chose from. An ETF is a marketable security that tracks the movements of an asset. There are many ETFs in the market. For instance, there are ETFs that track energy companies while others track bank stocks. The movement of an ETF will depend on the movement of the underlying assets. For instance, if energy stocks rise, the ETF tracking energy stocks will rise as well. Some of the most common gold ETFs are: SPDR Gold Shares ETF, ETFS Physical Swiss Gold Shares ETF, VelocityShares 3x Long Gold ETN, and DB Gold Double Short ETN among others. When trading in ETFs, remember a number of things. One, remember that ETF developers ask for a commission. In most cases, the commission is usually very small. Second, remember that the profits you can expect in the short term are really small. Follow this link to find more gold ETFs to select from.

#4 - Derivatives

Another way of trading gold without owning it is by trading other financial derivatives. The use of derivatives in the financial market refers to trading items that are attributed to other items. One way of doing this is trading in futures contracts. In futures contracts, a trader buys or sells the future price of an item. This happens as the users in the supply chain protect themselves from future movements of the market. For instance, if the current price of gold is $1000, and you anticipate that it will be $1100 in the next 30 days, you can get into a transaction that will ensure you benefit from this movement in price.

Trading Gold Without Owning it - Useful Links

  • Discover more about Trading gold without owning it on Investopedia
  • Read how to generate profits from gold without owning it on LinkedIn

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