Gold has enjoyed a special place in the financial markets for millennia as a store of wealth, a hard currency inflation hedge and a widely accepted medium of exchange. You’ll want to invest in gold through a reputable online broker. Remember though that not all brokerages are created equal, so be sure to carefully consider your needs before opening an account with one.
Overview: How Investing in Gold Works
As one of the original market commodities to be traded, gold has a long history for both investors and traders alike. The precious metal also often trades in broad sweeping moves that can make it suitable for long and medium-term trading strategies that follow trends, as well as for investors looking for capital appreciation by holding a hard asset.
Shorter-term strategies like day trading and scalping can also be viable in the gold market, although their success can depend on market conditions since they tend to do best in volatile markets. Nevertheless, traders using those relatively active strategies tend to pay more in commissions and dealing spreads than investors who look to buy gold on dips and might hold the metal for years or even decades.
Your gold broker selection may also depend on whether you want a broker to employ a long term investment strategy or a short term trading strategy with. Furthermore, for those who wish to invest in gold over the long haul and want to use it as a hard currency if times get tough, then taking secure physical possession of the metal once purchased could be a suitable option.
When investing in physical gold, the usual strategy involves waiting for a dip in the gold market to purchase some physical metal. You then just take delivery and hold onto the gold in a very safe place. If the market then rallies to a high point where you think it should then correct lower, you can sell some of your gold and wait for another dip to purchase it back at.
History and Future Outlook of Gold
As a store of wealth and an indestructible inflation hedge, gold has enjoyed an impressive run as one of the most popular hard currencies in history. Even if people lose faith in the value of fiat or paper currencies issued by nations, they will still probably consider gold of at least some value in transactions.
Furthermore, precious metals like gold often appreciate sharply during troubling geopolitical events that might include outbreaks of war, major elections, military coups, and natural disasters. Even U.S. interest rate changes, central bank reserve changes and gold production-related events can influence gold prices on the global market.
When unexpected, troubling incidents can notably boost the precious metals market — and especially the price of gold — as investors engage in a desperate flight to quality. Also, since precious metals like gold have traditionally been considered safe havens in times of economic hardship and social unrest, they can be purchased by investors to serve as a popularly accepted type of hard currency in case an economic breakdown occurs.
With respect to determining gold’s future outlook, performing fundamental and technical analysis are your go-to options. Those interested in investing in gold can also review market sentiment indicators as an important clue to the market’s future direction. A popular sentiment report is put out by the Commodity Futures Trading Commission (CFTC) and is known as the Commitment of Traders (COT) report.
Released on Fridays at 3 p.m., the CFTC’s COT report breaks down the long and short open interest in gold futures and options by the type of trader holding the position. Excessive open interest imbalances tend to suggest a market reversal may be forthcoming.
What to Look for in a Gold Broker
Every online broker offers different services and tradable products, so be sure to choose one with the best features among those you require. You will also want to look out for the following items to make sure a broker measures up adequately as you are reviewing your prospective choices.
Any online broker should be overseen by a major financial regulatory agency. These might include the UK’s Financial Conduct Authority (FCA), the Australian Securities and Investments Commission (ASIC), or the Commodities Futures Trading Commission (CFTC) and the National Futures Association (NFA) in the United States.
Also, brokers regulated in European countries need to comply with the EU’s Markets in Financial Instruments Directive (MiFID) and its more recent revision the MiFIR.
Any good online broker should provide trading via a software platform that is easy and free to
use. While many online brokers have their own proprietary platforms, most will also gold market access via the popular MetaTrader 4 or 5 platforms from MetaQuotes. This platform is the market standard, and it allows traders to draw and trade from price charts, perform technical analysis, review financial news, backtest strategies, create custom indicators and even automate their trading.
Minimal Spreads, Commissions or Fees
While spreads and fees will not affect long term traders or investors greatly, the profitability of those using active short term trading strategies can be significantly impacted by high charges of this type. It therefore makes sense to inquire about any trading, fund transfer or gold storage charges that may apply to your activities.
A good quality broker will often have their own research department providing fundamental and technical analysis to help clients inform their trading and investment activities. Discount brokers typically have fewer offerings in this regard than full service brokers.
Competent Customer Service
Traders and investors may need to contact their broker quickly in case of an error or with an important question. Any broker should have a good and responsive customer service department with a live chat function, phone access, email support and a comprehensive FAQ to answer common questions.
The Best Gold Brokers
While many online brokers will allow you to get involved in gold trading, each of the brokers featured below let you trade gold and gold stocks in a variety of different ways. These include gold futures and options, as well as gold mining stocks and gold ETFs (exchange-traded funds). Each of these brokers is based and regulated in the United States, so they are all competently overseen by both the NFA and the CFTC and will accept U.S. based clients.
Broker 1: FOREX.com
As one of the largest forex brokers based in the United States, FOREX.com offers unleveraged spot gold trading. The broker requires a $50 minimum deposit to open an account with, but a substantially higher amount would be needed to traded spot gold on an unleveraged basis and you should also maintain an excess balance in your account.
FOREX.com also has a direct market access (DMA) account that has a $25,000 initial deposit and can be used for unleveraged spot gold trading with associated fees consisting of their dealing spreads.
Traders can also access gold futures and options if they trade via FOREX.com’s FuturesOnline subsidiary.
Broker 2: Interactive Brokers
Interactive Brokers offers some of the industry’s best trading commissions on futures. This broker seems best for active advanced traders who are also well-funded since IB has a minimum deposit requirement of $10,000.
In addition to gold trading, the broker lets you access 35 futures and options commodity trading centers around the world. IB also offers an advanced in house trading platform that has a full set of advanced technical analysis tools designed for even the most demanding trader.
Futures and options commissions run only $0.85 per contract, and extra discounts are available for traders dealing high volumes.
Broker 3: E*TRADE
E*TRADE is a popular online broker providing access to over 200
E*TRADE’s platform is both intuitive and simple to operate and the broker also has a mobile app. It charges a flat $1.50 commission for futures contracts and has a minimum deposit requirement of $10,000 for a futures trading account.
E*TRADE gives its clients access to high quality research from the CME Group that is the largest futures exchange worldwide.
Broker 4: TradeStation
TradeStation lets you trade more than 80 futures products, including gold futures and options. Its well-integrated and sophisticated desktop platform lets you trade stocks, futures
It also offers a mobile app, in addition to a variety of advanced order types and market analysis. Trading gold futures in 300 contracts or less costs $1.20 per contract, although fees drop down to $0.25 per contract for at least 20,000 contracts traded.
You will also need a $5,000 minimum deposit to trade gold futures and options via TradeStation, in addition to being willing to pay the broker’s software usage fees if your account is less than $100,000 in it, although that requirement can be waived if you make at least 10 round-trip futures trades, or if you trade 50 option contracts or 5,000 shares.
After you’ve decided upon your gold trading or investment objectives, you will have determined whether having a gold broker makes sense or if physical gold is what you are looking for.
If you do decide to use a broker, then you can check out those who provide the gold related instruments you most wish to trade, which include spot gold, gold CFDs, gold futures and options, gold mining stocks and gold ETFs. Once you have found the best broker for your needs, you should test your trading plan using a demo account funded with virtual money.
On the other hand, if you want to invest in physical gold, you will need to purchase it, take possession in a secure manner and then store it very safely. Physical gold can be obtained from a dealer that specializes in selling gold metal and other gold investment products.