By Paul Bracchi
In recent years there has been a boom in the price of gold and this has led many people to develop an active interest in investing in gold & other precious metals.
Despite what many pundits claim, no one can predict future price movements of any commodity or stock, so in this article I want to lay out some guidelines that will increase your chances of your gold investment being profitable.
The first- most obvious point is that to make money on any investment you need to “buy right”. That is actually buy what you expected and pay a reasonable price for it.
The cheapest ways to buy gold, in sequence, are: bars (Ingots), Krugerrands & American Gold Eagles.
If you live in the UK, the gold eagle will probably be replaced in this list by the gold sovereign. Sovereigns also have the advantage of being exempt from C.G.T. (Capital Gains Tax) in the UK.
Once you leave this small group of coins prices rise rapidly and your opportunity for pure gold investment profit falls.
Having said that, some of the coins not mentioned, often provide greater potential for numismatic gains- but that is a different story.
The next point is, you have to be conscious that one day you plan on selling this investment. Therefore you need to be aware of what your exit strategy will be.
Who will you sell to? In what quantity? Do you want to sell small quantities over a period of time?
From these three choices, gold ingots can, at first glance, be usually purchased for the lowest percentage premium over the gold “spot” price.
It is not widely appreciated that the price for a single one ounce bar is usually exactly the same as for a single one ounce Krugerrand- and in quantity Krugerrands often work out cheaper. The reason is that there is a vibrant market that “knows” what a Krugerrand is -whereas some one ounce ingots especially those from lesser know smelters, seem to carry a slight cloud of suspicion (it’s as if you have to “prove the ingot is good”).
However, if you plan on investing more money in gold, the larger bars, such as one kilo sell for a lower percentage premium than Krugerrands. But, again, they are not as easy to resell. You will need to visit a bullion dealer to get a good purchase price for gold bars. Would a restriction like this affect you?
Another issue with the larger bars is that you can’t simply sell a portion of it when you want to!
The American Gold Eagle:
This has many of the same advantages as the Krugerrand. It is a widely recognized and traded coin. It sells (normally) for marginally more than Krugerrands- but depending on where in the Country you are, you may be able to get the same price as a Krugerrand. It is a superior looking coin and would get my “thumbs up”, as the bullion coin of choice.
The final piece of Gold investment advice could be considered common sense- but it bears repeating:
Buy when prices are low!
Whatever you invest in, be it stocks, bonds or gold buy when the price is low rather than high!
The recent boom in the gold price has in part been driven by people hearing about the price rises in the media and trying to jump on the bandwagon.
If you are just finding your feet in the gold investment world, it may be wise to watch, learn and wait till prices pull back before investing.
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Trade gold with these Forex Signals by two top gun traders. Watch this weird 30 minutes Stock Trading video just now. Learn How To Trade Futures from Malcolm Robinson. Gold prices recently reached almost $1,400 per troy ounce before making a retracement. Gold market is in an unprecedented uptrend for the last many years. Many analysts are predicting that gold prices can reach as high as $2,500 in the next six to twelve months. Nobody knows! Nobody was expecting the gold prices to make a retracement. But trends never move in straight lines. Prices move up or down, they consolidate and make a retracement and then again start moving up or down. Silver is another precious metal that is expected to skyrocket in the next few years.
Let’s illustrate this precious metals trading strategy with an example. A gold futures contract consists of 100 ounces. Now, the margin requirements can vary from one broker to another but it is generally around $5,000. This means you can control 100 ounces of gold with $5,000. Each point the gold futures contract moves up or down, you make $10 or lose $10. Suppose, you bought the gold futures contract and it moved up by 50 points. You make $500 less the commission and other fees).
Let’s get back to our gold trading strategy. Suppose, you buy one gold futures contract that means 100 ounces of gold. It closes up by 30 points in the next few days. You are happy. By the end of the week, it gains another 20 points. You sell your gold futures contract. So, with this one gold futures contract you have made 50 points. That means $500. This is your first trade in a series of four trades.
Now, markets move up and down. When the market moves against you, you don’t need to panic if you have managed your risk. The market moves down. But you are confident that it will again move up. This it does after a few days. You again enter the market with two gold futures contracts. Within a few days, the market moves up by 50 points. You decide to sell your two contracts and realize your profit of $1,000. This is your second trade in a series of four trades.
Next week you buy three contracts. Rumors are flying about gold prices rising again. You want to profit from it. This time, the contract goes up by 100 points. You sell your three contracts and realize your profit of $3,000. This is the third trade in a series of four trades.
Suddenly gold prices drop like that did a few days back. You are shocked. But don’t worry; this is the way markets work. You wait for a few days and the prices again start climbing. You buy four gold futures contracts this time. You wait a few days before the contracts each move 50 points. You sell all the four contracts making a nice $2,000. This was the fourth trade in a series of four trades. Your net profit is $500+$1,000+$3,000+$2,000=$6,500! Not bad! Now, you will start all over again with a new series of four trades repeating what you did above.
The essence of this gold trading strategy is to remove your profits from your account once the series of four trades is complete and start all over again with one contract. These series of four trades you can repeat as many times as you want removing the profits at the end of each four trades like above. This is how pro traders trade and how you should trade too by pyramiding your position through a series of four trades.
For those who are involved in getting the stock market, one of your first questions may be exactly what penny stocks? There is a lot of hype, good and bad press surrounding with Penny stocks. Here we briefly turn some of this information to help you decide if trading penny stocks for you.
Cheap stocks, by definition, from the U.S. SEC, are defined as stocks that are less than $ 5 in value per share (most of them less than $ 1), which are traded over the counter, through the quote services. Cheap stocks, as they say, “bad bargain”, and hundreds of millions of dollars are sold every day in cheap stocks.
Penny Stock Trading is a speculative market, and not listed on the NYSE, NASDAQ or AMEX. They often have such low prices because they are very small, inexperienced company, although often these companies were previously traded on the NYSE and other markets, but because they do not meet their standards, they were kicked out, and now Penny stocks.
Penny stocks often attract new investors because of their extremely low prices and the attractiveness of large growth fairly quickly. Although this is a gambling mentality sometimes pays off, often these companies go out of business or lose their value all together. Shares Trading Penny is extremely risky for many reasons.
There is limited liquidity, because it can not always be a buyer willing to buy stocks you are trying to sell. It is often difficult to decide what to buy due to lack of financial reporting standards, so research a company before buying stock is virtually impossible. There is also a large number of fraud in penny stock game, because of low standards and lack of available information.
If you have an interest in the stock market, the popular shopping stores, probably a penny seems very attractive to you, because the potential for high returns on their investments. There are many things you should look at before the trade in these type of actions, including the timing of your purchases and when to buy stocks.
It is very important before the start of trading penny stock that you have accumulated a considerable amount of money to work. While penny stocks are very attractive to investors because of their low cost (SEC defines penny stocks as stocks that are less than $ 5 per share per share), many of these stocks lose their value in relation to events as a company goes out of business.
You may also want to be able to buy and sell these shares at moments notice, and at this point you will not have time to move funds to brokerage account, so it’s important to start penny stock trading where you are comfortable financially to do so.
Prior to investing in penny stocks, you also need to make one big decision whether to use a broker / consultant to help you decide which stocks to invest, or do it yourself using an online site. There are benefits to each side of the trade.
With the help of a broker, you must pay interest to the broker as they occurred, but you get the benefit of showing the ideas of an experienced professional who can help you maneuver the often misleading information available there on these stocks. But in managing things yourself using an online site, you usually pay a fixed fee and wind to reduce costs, make your trade.
If you would like to move forward trading cheap stocks on your own, using the Internet site, timing your purchases will be important. This is a good idea to trade through the site, which will make recommendations for your time and what stocks are hot. Although you can not rely on this information to turn into something concrete, at least, you will have some guidance on how to choose the right penny stocks.
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