Jiří Filip Commercial message: Gold has long been ranked next to real estate as one of the most popular instruments in the Czech Republic. The precious metal is down 7% since the start of February, is this a good time to buy or are we looking at new lows? And in what ways can we actually invest in gold? XTB analysts elaborated on this topic report, in which you will learn everything you need.
Gold is often referred to as a safe haven and protection against inflation, but even this commodity is experiencing turbulent times by its standards. Before the current drop in price, we have seen a rally since November of last year that has lifted the price from more than 20% over the course of several weeks. This, in turn, was preceded by a downward trend that lasted de facto the entire year 2022.
Whether gold will be successful this year is still a matter of debate – because it mainly depends on whether we avoid a recession or not. Unfortunately, there is still no clear answer to this question either. But many investors are turning to gold in these volatile times. This precious metal may not be an ideal safe haven, but it can still be a great means of diversifying risk. In general, gold investments can be divided into three main groups:
1. Gold in CFD form
This instrument is mainly used for trading in shorter to medium time horizons. The advantage of this method is that one does not need such a large amount of funds thanks to the leverage effect. On the other hand, it is of course the riskier part of financial instruments, which requires good risk and money management. The second big advantage is the possibility of shorting, i.e. making money from a drop in price. This can also be used by long-term investors who have bought gold but do not want to sell it and expect its price to fall. In such a case, the open short position can cover the loss and our gold long-term investment will also remain intact.
2. Gold in ETF form
This form is becoming increasingly popular among long-term investors. ETFs tracking the value of gold have been available on the market for several years. Everything works on the same principle as, for example, an ETF copying the American SP500 index. These are therefore securities held with a depository, which gives this instrument a relatively high level of credibility. In addition, this market is very liquid - so it is not a problem to buy or sell your gold ETF in an instant.
3. Physical gold
The last popular way to invest is to buy traditional physical gold. The main advantage of this method is that you can have gold at home ready for an apocalyptic scenario where you can take your few gold bars or bricks and disappear within minutes. Outside of this scenario, however, physical gold is a relatively problematic instrument. It is definitely not as liquid as securities, so selling or buying can be lengthy and require a physical meeting. Another problem is its storage, which can be insufficiently secured at home, and if it is stored in a bank, it is difficult to get to it in case of immediate need.
There are several options for investing in gold, and it depends on everyone's preferences which path they choose. It is also not written anywhere that it is necessary to choose only one method. An investor can safely keep a small part at home under the bed in case of a crisis, a part in gold ETFs, and can still cover their positions using CFDs in case of a price drop.
If you want to learn more about the topic, in the report "How to trade the gold market" you will find information on how to use technical and fundamental analysis on this market, how the entire gold market works, who are the big players in this sector and much more. The report is available for FREE here: https://cz.xtb.com/hq-ebook-zlato
