Trading Gold On the Stock Market Using Mining Shares or EFTs

October 26th, 2011 |

Aside from other financial instruments like stocks, shares and derivatives, another tradable instrument is the precious metals like gold. As a matter of fact, this is among the most popular commodity in the field of investments. This is already being traded since the ancient times and even up to now. It is also being considered as a social fiat currency that is almost universally applicable to any kind of economies. Hence, since this is a valuable market, this makes it subject to speculation through the use of derivatives as well as futures contracts.
Now, one of the most used and popular instrument or tool that is being used in gold trading is the ETFs or what they call as the exchange traded fund. In a general point of view, this is actually an investment fund that is being traded. Well in fact, this is treated just like the ordinary stocks; hence, making this to be traded on stock exchange.
So, if a newbie trader wants to engage into this kind of funds in gold trading, what are the things that needed to be understood? In this light, there are actually at least three (3) things that a new trader needs to know. These are related to the types of ETFs, government regulations as well as the pros and cons of such investment strategy.
On the one hand, when it comes to the kinds of ETFs that a trader can use in trading gold, there are actually at least seven (7) types that one can explore. These are the index ETFs, commodity or ETCs, bonds, currencies, actively managed ETFs, grantor trusts as well as leverage type of ETFs. There are many properties associated with these types. Aside from that, one must also know that costs associated in trading gold using mining shares as well as ETFs.
However, one must always remember to have someone to ask to when it comes to knowing the technicalities of this kind of investment transaction. This is because being a newbie entails a lot of works to do and this cannot be done through self-studies. What this means is that one needs to seek professional advices from the experts.
On the other hand, a newbie financial trader also needs to know the policies and regulations governing such kind of gold trading using mining shares as well as ETFs. This is because the laws in a specific country heavily affect the level of possible profit that a trader will be able to enjoy. This will also dictate on the right strategy in playing this kind of game.
Last, but not the least, one needs to understand both the pros and cons of trading gold using mining shares and ETFs. This is because this is the only way in order to know if such investment is indeed wise or not.

Posted in: gold trade