In investing, gold is one of the investment instruments that is quite a choice for people. The reason is, because the price and value of gold tends to always rise every year, and gold is considered anti-inflationary so that investors feel safe by investing in gold.
Gold futures investment is one of the steps chosen by investors. This is a trade in the gold commodity sector on a futures basis. This trade is included in the international scale futures exchange.
To get faster or short-term profits, investors choose gold futures investments in the form of "trading" carried out on the exchange.
The advantage of trading gold is that you don't need to be confused about storing physical gold like conventional gold investments. Gold trading is not done in random places, and can only be done in the forex market.
By trading gold in the forex market, an investor can benefit from the value attached to gold without needing to own the gold physically. Now gold trading has become easier because of technological developments. We can trade gold online, so it becomes more flexible and free to trade anytime and anywhere.
1. Not Using Big Capital: to trade, of course we need capital to be used in the transaction. We as traders must prepare capital according to how much deposit must be submitted to the broker where we trade. In gold and forex trading, it is known as "Leverage".
Usually the broker where we trade will provide leverage as additional capital, so we don't need to prepare too large a capital when trading for the first time. If our capital is not sufficient to transact, the broker will give us leverage as additional capital.
2. Very High Liquidity Forex Market: the forex market is a market that has the highest liquidity in the world. Because in the forex market not only gold is traded, but also other commodities and foreign currencies.
That's why the number of transactions made in the forex market reaches trillions in just a day. Of course, as traders, we can make trading transactions with large enough amounts if we want to get big profits too.
3. Easy & Flexible Transactions: Another advantage is, we can make transactions anywhere and anytime. Because the forex market is active 24 hours a day 5 days a week, and by trading online, access becomes easier. Traders only need to use the internet and have a trading account installed either on a laptop, PC, or smartphone.
4. No Risk of Loss: The risk of loss in question is, in gold trading it does not have a physical form like conventional gold. In conventional gold investment, of course, we will buy gold in physical form and store it. Whereas in gold trading, only the value/price of the gold is traded.
Gold that is traded in the forex market is also in the form of "pairing" or pairs. And gold pairs are traded only to the US Dollar. Usually known as XAU/USD, where XAU = Gold and USD = US Dollar.
Although there is no risk of loss because it does not have a physical form, it does not mean that gold trading is not risky at all.
The name of trading certainly has risks. Moreover, trading in the forex market is indeed very high liquidity and volatility. Many traders fail to become bankrupt because they are not careful when starting gold trading. The opportunities that are obtained in gold trading are indeed very large, as well as the risks.
One of the biggest risks that traders face is the magnitude of price fluctuations that are very unpredictable in the market. The biggest mistake traders make is that there is no knowledge of market analysis that is mastered so that all transactions made miss and suffer losses.
In addition to the two risks above, here are some risks that traders face in gold trading:
- Interest Rates Change Quickly: Interest rates affect the exchange rate of a country's currency. When interest rates in a country increase, the price or value of that country's currency will also get stronger.
This is due to the flow of investment funds into the country. If interest rates decline, the country's currency will also weaken. This fluctuation in interest rates triggers price fluctuations in the forex market both related to forex and gold trading.
- Too Large Leverage: although leverage is one of the facilities that help traders to increase their initial capital, this can be a risk faced by traders.