The Gold returns since 1980 show why the precious yellow metal Gold is considered to be a great investments in most developing countries like India and China. Several brokers encourage Investing in Gold, but there has not been many takers in developed counties like US, UK and Europe. One of the major reasons for lack of interest in considering Gold as an investment is that it pays no interest or dividends. Further, Gold’s value depends on many factors like economy, political risk, trade wars due to which it may or may not go up over several decades — in fact Gold lost value between 1980 to 2000 in Japan, US and Europe. This was not the case with currencies of most other developing countries. In India and China, Gold has always been traditionally bought by household either for decorative or investment purposes.
According to a report published by China Gold Online website about 16,193 tons of gold are owned by Chinese citizens and 4,000 tons are held by the country’s central bank. China seems to have overtaken Germany as the second-largest holder of gold in the world after the US which as per World Gold Council has reserves of 8,133 tons.
Liu Xuezhi, a senior analyst at the Bank of Communications says that unlike credit currencies that are subjected to market uncertainty, gold is a relatively safe and independent vehicle to hedge against fluctuating exchange rates and at least maintain the asset’s current value.
With major players like FaceBook entering into the world of Crypto Currencies, it becomes increasingly difficult to make any sure long term investments. US dollar is currently the largest reserve currency in the domestic market, with no real threat for its dominance in sight. But will this be the same after twenty, thirty or fifty years, only time can tell. If countries like US, Germany, China and India holding gold reserves then why should Gold not be a part of the portfolio of prudent investor.
Gold could be an excellent instrument for investors seeking diversification of portfolio to avoid potential risks, such as the devaluation of US dollar or shift towards an alternate reserve currency. Gold also gains value during political and financial turmoil.
For Non-US citizens, Trading Gold and Forex is allowed on the same account with a range of brokers to choose from. For any trader or investor, safety of funds are of paramount importance. Brokers regulated by Financial Conduct Authority in the United Kingdom or ASIC regulated brokers in Australia are highly preferred by professional traders and high net worth individuals.
With the higher leverage offered by Forex brokers, trading Gold would be a better option than holding it like an investment over the longer term. Buy Low, Sell High strategy could be implemented using the weekly time price action. Traders willing to trade more frequently can even consider the daily time frame for taking advantage of the short term gyrations in Gold prices.
In the USA, forex trading can be done practically the same way that as rest of the world. But gold, oil, commodities or securities have to be traded on an exchange in the USA. Forex brokers regulated in the USA cannot offer GOLD for trading. With such regulations, US citizens are left with the following two options for trading or investing in Gold:
1) Use the ETF for gold (GLD) in the equities market with a U.S. broker
2) Use gold futures (GC) or futures options
Interactive Brokers is a good choice for US investors planning for long term investment and portfolio diversification by participating in the Global market place. With Interactive Brokers, it is possible to trade stocks, options, futures, forex, fixed income, ETFs and more from a single IBKR Integrated Investment Account.