What is gold?
Originally sought after for its beauty and physical attributes and later used as currency, gold continues to be a viable investment option for those seeking diversification in their trading strategy. While many of us picture elaborate jewelry and ancient coins when we think of gold there are a multitude of factors linked to demand for gold. Gold spot price is influenced by individual investors, government reserve asset requirements, luxury goods manufacturing and use in technological (industrial) components. Gold is also viewed as a ‘safe haven’ investment and geopolitical turmoil and economic downturns will usually, but not always, put upward pressure on the price of gold.
Almost half of annual gold production takes place in the top five producing countries. These are China, Australia, Russia, USA and Canada. Traditional mining companies like South Africa still produce large amounts of gold annually but their overall share has decreased in the past few decades. The vast majority of gold is produced through targeted mining operations with a small percentage captured as a byproduct of copper and nickel mining.
There is also a relatively small but growing amount of gold being recycled from end of life electronic and industrial products which adds to the annual production figures. While it is definitely true that the supply of ‘new’ gold has some effect on the gold spot price, there are vast sums of gold currently above ground that are hoarded away by individuals and governments and allocation of these reserves can influence the price of gold more than production itself.
Historical Gold Prices
The weekly price chart shows that gold reached its 10-year high (and all-time high) closing price of $1896.50 USD in September of 2011 and its 10-year low of $1049.41 USD in December of 2015. This variation represents an almost 45 per cent change over a relatively short time period.
How to invest in gold
There are multiple ways to invest in gold. You can buy physical gold. This can be in the form of bullion (bars), jewellery or coins. The disadvantages of this method are that you must store the gold and ensure its security, typically by storing it in a bank which costs money.
You can purchase mutual or exchange traded funds (EFT). These funds are linked to the price of gold and the administrator of the fund holds the gold on your behalf. They are more accessible than owning gold outright. You can also purchase gold certificates which represent a certain percentage ownership of a company involved in gold trading or a certain amount of gold itself. You can invest in gold indirectly by purchasing shares in gold mining or royalty and streaming company. These companies benefit from increases in price but are subject to the same risks and volatility as other stocks.
Traders using the Currency.com tokenised platform are able to profit from movements in the gold market price or other gold-based assets such as ETFs. Tokenised assets are crypto derivatives whose value is linked to the value of a particular asset, in this case the price of gold. The token is registered using distributed ledger technology (DLT) the same way cryptocurrency is recorded. This technology allows for trading using crypto without the need of converting back and forth to fiat currency. Utilising this technology makes tokenised security trading efficient, inexpensive and secure.
When gold trading you can take long or short positions depending on where you feel the price is heading. If you think the price will decrease you can short the tokenised gold security and if you think it will increase you can take a long position. Trading in tokenised assets on Currency.com also allows for traders to benefit from the leverage offered on the platform, up to 1:100.
Tokenised gold trading guide
Trading tokenised gold is no more difficult than trading regular assets. To begin trading tokenised gold assets, you will follow some simple steps:
- Step 1: Register for an account with Currency.com.
- Step 2: Deposit funds (with crypto or fiat) in the account.
- Step 3: Determine the position size desired, accounting for leverage offered by Currency.com.
- Step 4: Determine your trading position (long or short) based on expected share price movement and purchase tokenised gold derivatives.
- Step 5: Currency.com matches the long orders from its clients with the sell orders and then hedges the unmatched orders through Capital.com, LMAX Digital or exchanges such as Binance, Bitstamp, Kraken, NASDAQ, NYSE and Gain Capital.
- Step 6: Close your position when applicable. You can set a take profit or stop loss indicator to ensure you are not required to constantly monitor the price. Funds will deposit back to your account after closing and you can withdraw or take a new position.
Why trade tokenised gold assets with Currency.com
Trading gold at Currency.com tokenised assets exchange has a number of advantages. Tokenised assets are underpinned by robust and immutable blockchain technology. Opening a trade will give you a token that tracks and moves according to the underlying instrument's price.
- One-stop crypto trading platform
Trade tokenised gold with Bitcoin or Ethereum. Benefit from the stock's price movements without turning your crypto assets into fiat.
Trade tokenised gold with a tight market spread, benefit from maker rebates and competitive taker fees.
Experienced traders can trade the world's top commodities, like gold, with up to 1:100 leverage.
- Effective risk management
Manage your risks and secure your profits with stop loss and take profit orders. Save your assets with negative balance protection.
We have a scalable and low latency order management system, which can execute 50 million trades per second.
Currency.com operates under new Belarusian regulation with best-in-class AML and KYC laws. Regulatory details and fees are upfront.