KT Explains: How can I trade in gold? Should I opt for a gold mutual fund?

Dubai - Are you an investor who wants to park funds in gold? What's the best way to do it? Here's a guide.

By Shajar Khan

Published: Sun 13 Jun 2021, 12:51 PM

Last updated: Wed 30 Jun 2021, 3:45 PM

There is a contract for difference (CFD) in trading gold on online platforms, which means that you are trading the price difference of gold and do not want to hold physical gold. Should you wish to buy physical gold, and upon selling, you must seek out a seller.

Also read: What is gold/forex trading and how does it work?

Trading means you opt to open your trading platform on your app and select "buy" if you think the price will go higher. However, with the CFD, you can initiate a sell position.

> Understand what drives the price of gold

> Find a suitable option to acquire gold. This can be done directly in physical form or indirectly through futures or a gold ETF or mutual fund.

Many UAE banks offer gold investment options, which is convenient and easy to manage.

Finding the best fund is vital for successful precious metals investing, diversification, risk management and hedge against inflation.

Top 10 international funds that have proven to be successful players on the market according to Top 10 Gold Mutual Funds – Gold and Silver Expert.

SPDR Gold Shares (GLD)

USAA Precious Metals (USAGX)

Tocqueville Gold (TGLDX)

Oppenheimer Gold and Special Minerals A (OPGSX)

Van Eck International Investor Gold A (INIVX)

AIM Gold and Precious Metals Investor (FGLDX)

American Century Global Gold Investor (BGEIX)

Franklin Gold and Precious Metals A (FKRCX)

DWS Gold and Precious Metals A (SGDAX)


What are the risks in investing and how to tackle them

What is a gold mutual fund?

A mutual fund is an open-end managed investment fund that pools money from many investors to purchase assets. The fund takes the money and will either buy physical gold or a mix of physical gold, mining gold, mining companies and futures contracts in gold. There are various funds to choose from. According to Monte Safieddine, a market analyst at IG, a British company providing trading in financial derivatives, gold mining stocks were in favor at one point. However, when gold prices declined they went out of favor because people assumed they might not get the returns out of it.

What are gold investments?

The UAE is the core of trading gold globally. Gold appreciates over time and can provide high returns. Like any other investment platform, you can make small or large gold investments, starting at Dh15,000 with small dealers or higher amounts with investment houses such as Bullion Vault and Regal Assets.

Gold dealers in the UAE:

· National Bullion House

· National Metal DMCC

· Dhabi DMCC

· Ka loti Precious Metals

· Al Etihad Gold

· Emirates Gold

· Al Bahrain Jewelers

When investing in gold, you have the option of selecting digital trading via the Dubai Gold and Commodities Exchange. If you are purchasing gold online, you should investigate the company's reviews and seller before buying. It is essential to check the buyback policy of the company as well as the premium fees charged.

What causes the gold price to fluctuate?

There are a few factors that cause the fluctuation of the gold price.

· Sentiment - what are others doing? Or what are others buying? If everyone is buying gold, that will automatically drive the price up.

· Fundamental factors include the economy and interest rates because gold by itself does not yield anything. This means if you hold gold right now, it will not give you any return.

Why is it that cryptocurrencies like Bitcoin are growing more rapidly than gold?

Bitcoin hardly has any liquidity on the exchange. Safieddine's example of an illiquid environment relates to a person driving on a highway and there are no cars in front of him/her. This means that he/she can step on the gas and go as fast as he/she prefers, as well as slam on the brakes and go in reverse without hesitation. There are no genuine buyers and sellers on the other end and you can kick the price in one direction or another.

With gold, there is more liquidity on the exchange and there is central bank support on both ends that prevent it from extreme highs and lows, which also applies to FX currency. Therefore, currencies will move an estimate of 0.5%. You will not see much movement as you would with cryptocurrencies, e.g. Bitcoin, where there is a movement of 10 per cent or 20 per cent.

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