Physical gold: purchasing physical gold in the form of jewelry, coins, or bars provides direct exposure to the metal, but involves considerations such as secure storage, insurance, and higher transaction costs.

Gold ETFs/ETCs: exchange-traded funds or commodities offer a convenient way to invest in gold without holding physical metal. These products closely track gold prices and can be easily traded on exchanges.

Gold mining stocks/ETFs: Investing in gold mining companies or ETFs that hold a basket of mining securities provides exposure to gold prices. However, these investments carry operational risks and may exhibit greater volatility compared to gold itself. Since 2022, when the U.S. Federal Reserve began raising rates to curb surging inflation, gold miners have struggled relative to the gold price due to increased financing, labor, and material costs. The weakness observed in recent months has left the sector increasingly undervalued relative to gold prices that have reached new record closing highs.

Gold futures, CFDs, and options: trading gold futures, contracts for difference (CFDs), or options involves higher risk due to leverage. While these products offer speculative opportunities, they require careful risk management to mitigate potential losses.

COMEX gold futures have a contract size of 100 troy ounces and, with a current price of approximately $2,100 per ounce, a contract value of $210,000. As a leveraged product, the buyer or seller of a futures contract must provide less than $10,000 as collateral, leaving the position holder highly exposed to losses without proper risk management. CFDs track the price of futures with the main difference being the ability to trade smaller quantities compared to the 100-ounce futures contract.

Spot gold trading: another leveraged product that may be suitable for traders using risk management tools, while long-term investors may find ETFs the better option. At Saxo, you can use leverage to trade the gold price against 12 different currencies, including the U.S. dollar, euro, yuan, and Swiss franc, as well as silver.

What are the factors that drive gold?

Monetary policy: U.S. Federal Reserve policies, including interest rates and inflation targets, significantly influence gold prices. Since gold does not yield interest, rising interest rates increase the opportunity cost of holding gold, often leading wealth managers to reduce their exposure to real assets.

Currency fluctuations: gold prices generally exhibit an inverse relationship with the value of the U.S. dollar. A weaker dollar tends to push gold prices higher and, conversely, a stronger dollar can suppress gold prices.

Real bond yields: gold prices often move inversely to interest rates, as rising rates increase the opportunity cost of holding non-yielding assets such as gold. Long-term investors monitor the performance of U.S. real yields, which represent the return on a bond investment adjusted for expected inflation.

Central bank demand: several central banks have purchased gold in recent years to diversify their reserves away from heavy reliance on the dollar. Additionally, gold’s lack of credit or counterparty risk makes it a reliable reserve asset globally.

Geopolitical tensions: gold is considered a safe-haven asset, sought by investors during periods of geopolitical uncertainty or crisis due to its intrinsic value and perceived stability.

Speculative activity: hedge funds and speculators often anticipate and amplify price movements in gold markets based on fundamental and momentum-driven factors.