Buy and Sell Using CFD

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					Buy And Sell Gold using CFDs

The uncertainty within the financial sector in recent times has converted a great deal of traders’ interests to taking a
chance in gold. The real question is usually to discover the simplest way to generate a deal that enables you to
benefit from your instinct of where the prices are going. A number of investors elect to put money into mining and
shares, but this doesn't signify a principal trade upon gold rates. Actual gold, regardless of whether gold bars or
coins, offers stability and storage space issues. The futures finance industry is one more choice, however a lot less
complicated and much more readily available vehicle presented lately is the precious metal contract for difference.
However just what impacts the actual gold price tag? Can the recent move be sustained? And just how can
financial distribute betting help you make money from fluctuations in the worth of the gold cost?.

Typically, gold has often been thought to be a safe place throughout intervals of financial turmoil. This is partly
due to the perception that a commodity with innate value will hold its value better than an investment in less
tangible markets such as foreign exchange or shares, both of which can drop sharply on negative economic data.
Alternatively, high gold prices may have an adverse effect upon the jewelry market, an industry which still makes
up about 70% of the physical demand for gold. Add the truth that the recession seems to have arrived at its peak
and stock markets, individual stocks and foreign currency may all begin to see increasing appeal from investors
and traders. Both factors may negatively impact the gold price and push it down again.
Interest Rates
However, with interest rates lingering at all-time lows in the United Kingdom and low rates across the eurozone
and the United States, many investors and speculators are now starting to worry about inflation - a side effect of a
sudden recovery. An investment in gold is a great way to hedge against the spectre of inflation. Huge levels of
government debt can also hit forex markets and cause traders to seeks refuge in gold. This could see gold prices
carry on their upward surge. But then again, there is the question of how far beyond the $1000 per ounce mark the
gold price can rise. When it hit similar levels six months ago, the gold market was unable to support much
additional gains.
Gold futures

A way of trading gold is by through gold futures which are traded on stock exchanges in London, Tokyo, Sydney,
Singapore, at the New York Mercantile Comex Exchange (COMEX), the New York Mercantile Exchange
(NYMEX) and at the precious metals department of the Chicago Board of Trade (CBOT). The COMEX gold
futures contracts are traded in the pit from 1.20pm to 6.30pm using the old traditional open outcry method. This is
the time when these contracts are most heavily traded, although electronic systems allow the market to remain
open all though the day.

Gold futures consist of contracts where one party binds itself to make or take delivery of a pre-determined quantity
and quality of gold on a future pre-determined date at an agreed price. Parties to the contract (which can be mining
companies, speculators, hedge funds..etc) may take or make physical delivery of the underlying gold on the
maturity date, although, in practice this is unusual. Future contracts are traded on margin and such investments
tend to be heavily geared to the price of the metal and thereby very volatile making them a high risk/high reward
investment.
Alternatives
An alternative is to use CFDs to gain leveraged exposure to precious metals. A gold CFD is a theoretical order to
buy or sell a certain amount of gold, and the profit or loss on the CFD is determined by the change in price of the
gold. As it is a derivative, you never have to deal with taking ownership of the metal, but you can enjoy all the
profits as if you had. The other advantage is that it costs you a fraction of the amount you would need to buy the
gold. Depending on how and where you trade, you will find variations on the gold CFDs available. For instance,
you may take a CFD over the spot gold price, which is the currently quoted price, or can choose to trade a
online cfds based on the gold futures price. Typically, there are standard sizes of contract such as 10 ounces or 100
ounces of gold, and also mini contracts at 1/10 of the standard size.

Whatever the size of cfd trading contract, the profit (or loss) that you make comes directly from the change in
value of that amount of gold. The margin, or amount you need to buy the contract, may be as little as 3% of the
value. You will be charged interest for every day that you hold the
gold cfd, as if you had borrowed the money from the broker to buy the full quantity. If the price goes down, and
you have a long position, you may also receive a margin call, which is an order from your broker to submit funds
to cover your losses to date.

				
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posted:11/29/2010
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