Watching gold price is the key to a solid financial future

Anchoring your portfolio with gold investments brings many benefits. To acquire all the inherent advantages in gold and use it properly, however, you need to do more than simply buy assets.

Like any other asset, the price of gold has its ups and downs. Wise investors need to analyze their own reason for involvement in precious metals in order to determine which gold assets that they should buy and how to use them. Watching the gold price is just one facet of a good gold-investing strategy.

Why Invest in Gold?

The setbacks in the gold price that occurred in April 2013 scared off some potential buyers. This skittishness is a novice trait in traders. Experienced investors know that retreats like that are just opportunities to live out the classic investment adage: buy low and sell high. The traders that bought back into gold when it dropped down to nearly $1,350 probably made some money when it zoomed back up to $1,450 in the next few weeks. Long-term investors that held on to gold avoided losing a lot of money on a momentary set back.

It is important to understand your goals when you invest in this precious metal. Most traders fall into one of two categories when it comes to buying precious metals such as gold. Some are in this corner of the market for the long-haul and others are looking to make money in the short-term through forms of technical trading.

Long-term investors in gold mostly think about one thing at this point in history: inflation. Governments around the world, the United States in particular, have been essentially printing money for years now. The inevitable inflation caused by this financial scheme has already been felt in food and fuel prices.

Gold has an interesting reaction to inflation over the long-term. Since gold cannot be multiplied effortlessly like a currency, it tends to have an inverse reaction to inflation. That is to say that gold will generally respond like every other commodity does to inflation: It gains value. Unlike other commodities, such as wheat or iron, gold is not quickly consumed by industries. Instead, it sits and acquires value in vaults and reserves.

Gold provides investors a hedge, therefore, against inflation. All the wealth that they have tied up in gold will keep up with inflation. They can prevent the erosion of the foundations of their wealth by building their portfolios on gold.
You can make money from gold investment in the short-term as well. Gold has been very active for over a decade now. It seems to either rise in value or experience brief roller coaster rides like the one it has been on since April. Steady rises in value make it easy for any trader to generate returns. Clever technical traders have used the ups and downs of the last couple months to earn money from quick changes in the gold price.

Live Gold Price

Using Gold Price Charts

A gold price graph is useful for both kinds of traders in the precious metals market. For the long-term investor, a gold price chart can provide a lot of confidence. This is critical when setbacks occur and investors are momentarily inclined to flee. One look at the gold price graph for the last 12 years demonstrates the reliability of gold for recovery from these scenarios. You will want to become familiar with how to read a gold price chart.

The technical trader, looking to make money from breakouts, can also rely on a gold price graph. Historical charts about any asset can reveal patterns. Many people now are comparing the fluctuations in the gold price to a similar event in 2006 and 2007. This precious metal lost more than 15% of its value in late 2006 only to gain nearly 25% by the open of 2007. Seeing and understanding these developments can turn gold into a day trader’s dream.

Types of Gold Investments

There are numerous ways to invest in gold. An investor does not need to utilize all methods of investment into this metallic commodity. Instead, there are particular assets that suit different investor needs.

• Physical Gold

Many proponents of gold are very vocal about their preference for physical gold. Instead of making generalized and indirect investments in companies and funds that own gold, they buy the gold themselves. These investors either pay to have someone hold the gold for them or they actually have it shipped to their home.

The argument for this type of investment is based on the idea that your gold is safer when it is with you. You do not depend on a faraway company to protect the gold for you. There is no chance that a company will fold and your gold become lost in the paperwork. Instead, it is sitting in a safe deposit box or in a safe in your closet, where you can access it at will.

There are some arguments against physical gold and in favor of other investment forms. Drawbacks to owning physical gold include the need to have this heavy metal shipped as well the cost and inconvenience of storing it.

• Gold Stocks

Some investors prefer to distribute their commitment to gold by investing in some of the many companies, which mine gold around the world. This type of investment in gold avoids the emotion-fueled fluctuations of the gold price. It also allows investors to combine their skills in fundamental research with the inherent defenses against inflation defenses found in gold.

• Gold Index Funds and ETFs

Many investors prefer to avoid managing their own gold and buy shares in index funds. ETF shares are increasingly popular because they provide investment in a powerful commodity while acting like stocks in terms of how they are bought and sold.

It does not matter how you engage in gold investing. The most important thing that many investors see is the excellent long-term performance of this asset and its protection against inflation. Well-known investors, such as John Paulson, have made immense gold investments because they watch the gold price and see the writing on the wall with regard to the future global economy.

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Author: David Kennedy Google+