For ages, Gold has acted as safe haven for investors during times of recession. The yellow metal is better store of value, when global economies tend to flounder as compared to other forms of investment. This is because, with Gold, you do not just get assurances of minimum volatility, but you also get meaningful return on investment.
However, over the last few years, the picture appears to have changed significantly judging by the current price of gold, relative to global economic conditions.
Global economic growth, chart via World Bank.
As demonstrated in the chart above, the global economic growth has dropped from 4.1% in 2010 to just 2.5% as of 2014. Much of this drop came between 2010 and 2012, but nonetheless, the small gain achieved over the last two years has been insignificant. This is mainly because majority of the world economies have been struggling with only a few demonstrating growth, a good example being the US.
As such, the global economic growth rate has remained more or less unchanged over the past two years, and this is bound to continue to the near future, as the likes of China, Japan, the UK and the Euro zone continue to struggle to improve their economic growth rates.
On the other hand, the price of Gold, which tends to go higher during times of recession, has also plummeted over the past couple of years, dropping from a high of about $1,900 achieved in 2011 to a low of about $1,150.
Trading gold can be very tricky if you are not accustomed to the cycles, and thus, investors have to find different ways of investing in the precious commodity. There are a couple of ways in which they can do this including investing in Gold via the commodity markets, investing in Gold bullion, investing in gold producing companies, or basically trading Gold as a derivative via Forex trading brokers or Binary options brokers.
Investing in Gold stocks
One of the best ways of investing in gold is via companies that specialize in mining and production of gold products. The good thing about choosing this route is that investors may be able to find a company whose stock price does not reflect the potential of gold deposits at its mines.
Normally, such companies would incur high initial costs for exploration and production, but when it comes to that period of selling the product, and then investors can expect a ramp up in revenues.
Generally, the stock price of the company would be lower during exploration and mining processes due to high costs accompanied by zero income, but when revenues begin streaming in, the price goes up. During exploration and production, the valuation of these companies would even suffer more when the price of gold is low, which means, investors can actually buy such stocks at a discount.
However, this theory does not apply to gold stocks that are already established and rely solely on old deposits and mines.
Investing in Gold via Forex and Binary Options broker platforms
Now, for those who are not keen on taking long positions on gold stocks, there is another way to play the yellow metal. Traders can simply trade Gold by taking long/short positions via various forex trading platforms like the MetaTrader 4.
The good thing about this is that, they are able to gain regardless of whether the price of gold is falling, or rising. This means that during economic uncertainties where the price of gold seems to be too volatile, traders can take advantage of several trading opportunities.
We also have binary options where traders can trade on close ended trades, in which the potential profit or loss is known in advance. The good thing about binary options as compared to trading gold via a forex trading broker is that, it is not necessary for the price of gold to move significantly towards either direction for a trader to make high profits.
All that is required is to simply predict whether the price of gold will go up or down given the prevailing market price, and then you stand a chance of earning up to 80% of your investment among most brokers.
For instance, at OptionsXO, a binary options broker, traders can make up to 75% for each winning trade on gold. This can be achieved by either trading via their desktop platform or the mobile application for various devices.
However, it is also good to state that binary options are high risk investment opportunities and that traders could actually lose all their investment. For instance, if you happen to get your prediction wrong, then the investment amount you had allocated to the particular trade is lost.
In addition, there are also cases of rogue brokers and traders should be careful when selecting their broker. It is important to try to check out what current clients are saying about a given broker, for instance, if they have a Facebook page like this one, it could be offer some real information.
The bottom line is that trading in gold can be very tricky especially if you choose to time the commodity price cycles and you get it wrong. However, trading the yellow metal via derivative instruments like forex broker platforms (commodities/metals) or via binary options broker platforms makes it easier because it does not matter what the direction of the tide is. All that matters is that you get the short-term movements right, and there are plenty of opportunities too.