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Investing in Gold

For hundreds of years, investing in gold has been the preferred market choice in times of uncertainty, and a substitute for keeping money. In the 1990s gold traded at $250 a troy ounce; today the price is about eight times as much. Online, gold is one of the most widely traded commodities.

When trying to assess what the gold price might do next it’s key, as with all commodities, to look at supply and demand.

For most metals this means comparing how much of the metal is being mined to how much is being bought as, say, jewellery or ingots.


But this equation is complicated for the yellow metal.  Gold is increasingly becoming a favoured investment for pension funds and speculators.  In addition, central banks are looking to hold some of their reserves in physical gold.

Within this guide, we’ll take a look at how investors might go about investing in Gold. Our guide to investing in Gold will help you understand the following:

  1. How does supply and demand affect the Gold price?
  2. What effect do Central Banks have on the Gold price?
  3. How can I start investing in Gold?
  4. What are Gold futures?
  5. Investing in Gold with ETFs

How does supply and demand affect the Gold price?

In terms of mining, the biggest producer is South Africa, with mines that can go five kilometres into the ground and take almost a full day to travel through. China, Australia, the US, Peru and Russia are also big gold producers.

The level of how much gold is mined globally tends to go slightly higher every year but in the short term, production can get disrupted by strikes, accidents or problems with electricity supplies.

On the demand side nowhere is gold as beloved as in India, Pakistan and the Middle East where festivals and big family occasions are marked with lavish gifts of gold jewellery.

China is nudging up in importance as a key gold buyer, here the consumers prefer gold bars to jewellery, similarly as in the US and in German-speaking parts of Europe.

What effect do Central Banks have on the Gold price?

When it comes to central bank holdings, there has been a complete U-turn in the way central banks view gold in recent years.

The trend in the 1990s was to sell gold reserves – the Bank of England infamously sold some of its gold holdings when prices were at their lowest – but this has changed completely since the credit crunch and now central banks, particularly those in emerging economies, are consistent buyers of gold. This means at least this portion of their reserves remains stable and is not exposed to the volatility of currencies such as the dollar, yen or the euro which can change as monetary policies change.

How can I start investing in Gold?

Gold is also one of the most widely traded commodities by online traders. There are a number of ways to invest or trade Gold. The most popular include

  • Futures
  • Exchange Traded Funds
  • CFDs
  • Spread betting

What are Gold futures?

Gold futures are financial contracts that allow traders to speculate on the future price of gold without physically owning the metal. When you buy or sell a gold futures contract, you are agreeing to exchange a specified amount of gold at a predetermined price on a future date. It is estimated that only 3% of all futures contracts are delivered, the vast majority are offset before expiry or rolled to another monthly contract. These contracts are standardized and traded on exchanges like the CME Group, providing investors with a way to gain exposure to the gold market and potentially profit from price fluctuations.

Gold futures offer leverage, meaning that investors can control a large amount of gold with a relatively small initial investment or margin. This leverage can amplify potential returns but also increases the risk of losses if the market moves against the trader’s position. Trading gold futures requires a solid risk management strategy and a good understanding of the market, including factors that influence gold prices, such as economic conditions, geopolitical events, and currency fluctuations. You can learn more about trading gold with our free online trading course here.

Trade Gold futures with these brokers

BrokerMinimum DepositMarketsProducts
Interactive Brokers
Interactive Brokers
$0Bonds
Commodities
Currencies
Indices
Stocks & Shares
CFDs
ETFs
FX
Futures & Options
ISA
Stocks & Shares

Interactive Brokers is one of the world’s leading futures brokers with the ability to offer direct market access to a range of securities. With previous personal experience of trading with this broker, The Armchair Trader knows that they offer excellent platform stability, an excellent range of markets, and solid customer support

 
IG
IG
£0Bonds
Commodities
Currencies
Indices
Stocks & Shares
CFDs
ETFs
FX
Futures & Options
ISA
Spread Betting
Stocks & Shares

Widely recognised as the largest broker of its kind for CFDs and Spreadbetting, IG has now expanded its services to include Equities and ETF trading. Their range of markets is wide reaching while both trading and share dealing costs are low. We really like their Smart Portfolio's which are ideal for inexperienced investors to gain exposure to the markets.

With deeper pockets to invest in their services than most brokers, IG's platform suite and trading support tend to lead the way. IG is a good all-rounder for novice through to experienced traders and investors.

 
Tickmill
Tickmill
£100Bonds
Commodities
Currencies
Indices
Stocks & Shares
CFDs
Futures & Options

Tickmill is an established, regulated broker. With a focus on platform technology, fast reliable trading and low costs, it is a good choice for the experienced high volume trader.

Gold ETFs

Exchange Traded Funds are a cheap and easy way to invest in Gold. These instruments allow you to gain exposure to gold without the need to physically hold the metal. They can be traded like stocks and provide an easy way to include gold in your investment portfolio.

Invest in Gold ETFs with these brokers

BrokerMinimum DepositMarketsProducts
Interactive Brokers
Interactive Brokers
$0Bonds
Commodities
Currencies
Indices
Stocks & Shares
CFDs
ETFs
FX
Futures & Options
ISA
Stocks & Shares

Interactive Brokers is one of the world’s leading futures brokers with the ability to offer direct market access to a range of securities. With previous personal experience of trading with this broker, The Armchair Trader knows that they offer excellent platform stability, an excellent range of markets, and solid customer support

 
Hargreaves Lansdown
Hargreaves Lansdown
£100Bonds
Commodities
Currencies
Indices
Stocks & Shares
ETFs
ISA
Stocks & Shares

With competitive rates for trading shares and ETFs and significant discounts on funds, Hargreaves Lansdown offer a cost effective way to access a broad range of markets. You can open a Stocks and Shares fund, ISA or SIPP for yourself or a Junior ISA for your children.

We like their Portfolio+ and Master Portfolio services - they offer a great option for investors who are unsure about where to start.

Hargreaves Lansdown is a market leading, FTSE 100 listed broker that can cater for the needs of the majority of investors. A solid choice in our opinion.

 
IG
IG
£0Bonds
Commodities
Currencies
Indices
Stocks & Shares
CFDs
ETFs
FX
Futures & Options
ISA
Spread Betting
Stocks & Shares

Widely recognised as the largest broker of its kind for CFDs and Spreadbetting, IG has now expanded its services to include Equities and ETF trading. Their range of markets is wide reaching while both trading and share dealing costs are low. We really like their Smart Portfolio's which are ideal for inexperienced investors to gain exposure to the markets.

With deeper pockets to invest in their services than most brokers, IG's platform suite and trading support tend to lead the way. IG is a good all-rounder for novice through to experienced traders and investors.

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