Gold
Gold is a chemical element with the symbol Au (from Latin: aurum) and atomic number 79, making it one of the higher atomic number elements naturally. It is a bright, slightly reddish yellow, dense, soft, malleable, and ductile metal in a pure form.
Gold has a dual role as both a commodity and a currency. It is often thought of as a hedge against everything. For thousands of years, it has been seen as a safe haven.
Gold prices are more dependent on the supply-demand equation and geopolitical events, etc., impacting that supply-demand equation. Gold is not like other asset classes that can be valued based on cashflow or intrinsic value. Because of this, gold prices tend to stay dormant for extended periods of time, which are then followed by sudden and volatile spurts in prices.
So, at least theoretically, if you get your timing with gold investment right, then you can generate good returns in the short term. But timing is not what comes naturally to most common investors.
Gold bugs — investors perpetually bullish on gold — have long been seen as a paranoid fringe of the financial world, holding the shiny asset as a hedge against a disaster they always think is near. From serious investors to newly minted day traders, everyone is talking up its virtues.
In fact, gold is a favored safe haven in economically troubled times. (Buying Gold in Hard Times)
In general, investors looking to invest in gold directly have seven choices as following.
1. Physical Gold
When most people think about investing in gold, bullion, coins, and jewelry are what they think.
Gold bullion comes in bars ranging from a few grams to 400 ounces, but it's most commonly available as one- and 10-ounce bars.
The most common gold coins weigh one or two ounces, though half-ounce and quarter-ounce coins are also available. Collectible coins, such as South African Krugerrands, Canadian Maple Leafs, and American Gold Eagles, are the most widely available gold coins type.
You may also opt to buy gold you can wear.
Small bars and coins accounted for approximately two-thirds of annual investment gold demand and around one-quarter of global gold demand over the past decade.
2. Allocated accounts/Paper gold
Bullion banks and many gold dealers offer their customers gold accounts consisting of gold deposits and resembling currency accounts. When a customer orders gold in grams or ounces, the bank will buy the gold on its behalf and electronically book the transaction into the account. Suitable for beginner investors.
3. Gold ETFs
Gold ETFs provide investors with exposure to gold by tracking the price changes of gold. This allows investors to profit from gold price changes without having to own the physical asset.
Physically-backed gold exchange-traded funds (ETFs), exchange-traded commodities (ETCs), and similar funds account for approximately one-third of investment gold demand. These funds were first launched in 2003, and, as of March 2016, they collectively hold 2,300 tonnes of physical gold on behalf of investors around the world.
Four top gold ETFs including SPDR Gold Trust; iShares Gold Trust; Van Eck Vectors Gold Miners; Van Eck Vectors Junior Gold Miners
4. Gold Mining Stocks
Investing in companies' stock that mine, refine, and trade gold is a much more straightforward proposition than buying physical gold. Since this means purchasing the stocks of gold mining companies, you can invest using your brokerage account.
The growth and return in the stock depend on the expected future earnings of the company, not just on the value of gold.
Investors should pay attention to the operating conditions of the gold mining company and analyze the gold market price trend.
5. Spot gold/CFD/London gold
Spot gold trading is an instant trading investment method that makes money by buying gold up and down, and it is a product circulating in the international financial market.
Spot gold is also called CFD or London gold. London gold is not a name for gold, but a name for a gold trading method, which is named after it originated in London.
Investors must master technical analysis and fundamental analysis methods to increase the investment winning rate significantly. Leverage conferred by margin will tend to amplify both gains and losses.
6. Gold futures
Futures are contracts to buy or sell a given amount of gold, on a particular date in the future. Futures are traded in contracts, not shares, and represent a predetermined amount of gold. As this amount can be, large futures are more suitable for experienced investors.
7.Gold option
Gold options are options contracts that utilize either physical gold or gold futures as their underlying instrument.
Call options on gold give the contract holder the right to buy the metal at a pre-set price before it expires, and put options the right to sell.
How To Invest In Gold For Beginners
1.Before entering the gold market, investors must have a preliminary understanding and understanding of the market.
2.Investors learn to trade through simulated trading.
3.When investors start real trading, do not rush to earn high profits in a short period. They can warm up with small orders and adapt to the gold investment market.
Analysis
President Tayyip Erdogan, on Saturday, unexpectedly fired Turkey's central bank chief, Naci Agbal, replacing him with a former ruling party legislator and opponent of tight monetary policy, Sahap Kavcioglu.
Turkey's lira plunged 16% to near its all-time low on Monday(22/03).
Concerns that developments in Turkey would threaten other financial markets strengthened the dollar, making gold expensive for non-U.S. investors.
Gold, which is priced in dollar, also lost safe-haven flows to the yen and bonds.
The metal may retest a support at $1,716 per ounce, a break below could cause a fall into the range of $1,669 to $1,691, according to Reuters technical analyst Wang Tao.
The gold market continues to struggle as bond yields hold near a one-year high above 1.6%; however, one market analyst said there is a strong floor as the bond market selloff cannot last much longer.
Chantelle Schieven, head of research at Murrenbeeld & Co, said that gold is still on track to end the year higher from where it started, despite the recent lackluster price performance.
"I think we have seen the lows in the gold price," Schieven said. "Whether the is $50 lower or a $100 lower, there is this floor in the market because we know that there's going to be a limit for how high yields can go."
As to how high yields can go in the near term, Schieven said she thinks the market's pain threshold is around 2%.
"If yields go up any further than that, consumers are going to be in trouble," she said. "I think if we see a further move to 2%, then central banks will start trying to jawbone the markets."
While the Federal Reserve is expected to remain extremely patient as the U.S. economy recovers, the gold market still has to deal with rising bond yields. Federal Reserve Chair Jerome Powell indicated that he wasn't concerned with the recent selloff in the bond market that has driven yields to a 13-month high above 1.7%.
For a lot of investors, higher bond yields, which are also supporting the U.S. dollar, are the biggest challenge for the gold market. However, gold's positive moves this week could indicate that the bond market is having less impact on the precious metal.
Adrian Day, president of Adrian Day Asset Management, said that he is bullish on gold as bond yields might be close to peaking.
"The bond vigilantes may not have been defeated by Fed Chair Jerome Powell's assertions that the Fed would remain easy, but eventually, through more words or by action, the Fed will stop the rise in long yields, and that will be positive for gold," he said.
Sean Lusk, co-director of commercial hedging at Walsh Trading, said that he is also looking for bond yields to find a natural ceiling as the U.S. central bank is expecting to keep interest rates at the zero-bound range for the next three years.
However, Lusk added that it is a little too early to get excited about gold as the market remains in a solid downtrend.
"With interest rates at zero, bond yields can only go so high," he said. "But I want to see gold hold at least $1,740 and see some weakness in the U.S. dollar before I start getting excited about gold."
Ole Hansen, head of the commodity strategy at Saxo Bank, said that he is also neutral on gold in the near-term, but he wants to see a break above $1,765 an ounce before he starts to become bullish.
He added that gold is "trying to reestablish its reflation credentials, something that has been sorely missing for the past four months."
Trading strategy (Source: Trading Central)
Pivot: 1737.50
Our preference: short positions below 1737.50 with targets at 1719.50 & 1711.50 in extension.
Alternative scenario: above 1737.50 look for further upside with 1743.50 & 1747.50 as targets.
Comment: the RSI is bearish and calls for further decline.
Supports and resistances:
1747.50
1743.50
1737.50
1731.50 Last
1719.50
1711.50
1699.50
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