The number one concern of almost all traders who want to invest their capital is whether their capital can weather the financial crisis or the market volatility safe and sound. Thus, diversification is their first choice to protect their investment portfolio against market volatility and inflation etc. Gold has historically been the favorite diversifier for traders due to its distinguishing advantages. Trading spot gold can not only protect traders’ investments but also harvest huge profit from it.
What traders need to know about spot gold?
Spot gold is the price of gold that is available for immediate physical delivery to the buyer. It is actively traded around the world on a number of different exchanges. The spot gold market allows traders to buy and sell gold against the U.S. dollar (USD) in order to speculate on the differences in the future prices. In other words, when you trade spot gold, you take a long or short position in gold at the same time that you take the opposite position in the U.S. dollar. Spot gold is quoted against the USD, represented as XAU/USD, and indicates how many U.S. dollars are required to buy or sell one unit of spot gold, which is equivalent to one troy ounce. Let’s make it simple with an example, if XAU/USD is quoted at USD1, 200, this means for every one ounce of gold a trader buys, he needs to pay USD1, 200. The quote can be different day in and day out due to the market volatility, if XAU/USD moves from USD1, 200 to USD1, 210, it means that the spot gold price has strengthened against the USD. Now for every one ounce of gold, the trader would have to pay USD1, 210, compared to the previous USD1, 200.
What are the advantages of doing spot gold trading?
Doing spot gold trading is quite popular among traders from all over the world. There are good reasons for that. To begin with, traders are able to trade in the spot gold market 24 hours a day from Monday to Friday, which is quite convenient for traders can choose the best trading time according to their own schedule without worrying about missing the chances of doing spot gold trading. Secondly, traders are able to get quite tight bid and ask spreads, which is beneficial for them to get the maximized profit. Thirdly, trading spot gold saves traders the trouble of finding storage place for physical gold and they do not need to worry about the security of the storage place etc. Furthermore, trading spot gold provides traders with potential of making good money. This is because the value of gold tends to appreciate due to its non-renewable features. Last but not least, trading spot gold is much simpler than trading forex. When trading forex, traders need to take too many factors that can influence various currencies into consideration. Traders only need to consider the factors that can affect the value of USD and the gold price when doing spot gold trading.