Gold Futures Hit Record High This Week, Gold Trading Still Seen as Safety Net


by Marco Lavanna

Historically, gold trading has always been considered a safe investment and hedge against inflation. Whenever there is economic uncertainty and turmoil in the global economies, smart investors turn to gold as a way to maintain the value of their investments. Typically, investors have banked on gold in USD but with the euro so unstable recently, there has a been a spike in trading in euro-denominated gold futures.

With Greece, Spain and Portugal already worrisome, this week’s warning from Fitch Ratings about the UK deficit really sparked concern over the European markets and what would happen next. As the debt crisis quickly overtakes one country after another across Europe, gold trading has continued to rise and was at record-breaking levels this week.

Gold assets are thought of as an insurance policy by many experienced investors because it is a way of preserving value when currencies are losing their values. Whenever there is a depreciating currency, gold goes up as investors hedge their bets.

Analysts predict that gold is likely to outperform other investments if the global economy cycles into a deflationary period, as is thought might be happening after the recent global financial crisis.

Leonard Kaplan of Prospect Asset Management says, “Everbody is scared that the recovery simply isn’t going to happen. During deflation, money gets destroyed and gold goes down the least.”

When one decides to invest in gold trading of one kind or another, there is a learning curve. It’s not like a person can just walk into their local bank and ask to buy gold like they can with savings bonds or CDs.

There are several methods of investing in gold, each with its own individual advantages and disadvantages. Some invest in gold coins simply for the value of the gold; others invest in coins that also have historical value. A person can actually buy gold buillion but it is bulky, heavy and not easily stored safely. Some will buy gold in jewelry form as an investment. All of these methods of gold trading will require a person to be able to store the gold physically but there are methods that do not involve actually being in possession of the gold.

The easiest way to invest in gold would be to purchase gold mining stocks or trade in gold futures. With gold mining stocks, a person can buy stocks through just about any brokerage firm. Gold futures trading is a leveraged method of gold trading where one is basically betting on the future price of gold — generally about three months in advance.

If an investor is new to gold trading, it is highly recommended to do some research and find out how the gold markets work. One of the best ways to learn from successful gold traders is to join a discussion group centered on gold trading, like The Gold Economy Forums. In the forums, new gold traders can find out about how the markets work and the best methods of gold trading for the current economic situation.