Gold stock trading takes two main forms these days: they come in the form of ETFs and futures contracts.

ETFs, or Exchange Traded Funds, are an inexpensive way for investors to get into stock trading focused on this precious metal. An ETF tracks an underlying package of stocks from which the fund derives its value. They are like an index fund but trade like an individual stock. You can sell them short, buy them on margin, and even buy just one share. It typically orders only the value of just a fraction of an ounce per share. This makes it much more affordable for the average person to participate in the stock, rather than having to invest directly at its full spot price. You can get into one of these funds if you only have a few hundred dollars of investment capital.

Trading gold shares with ETFs means you can get in on the action of buying and selling gold without having to take physical delivery of any bullion, since what you actually own and trade is the value derived from the reserves you own. owner of the particular find. These ETFs were first introduced in 2004.

On the other hand, in August 2008 the SPDR Trust Fund was the most traded ETF of this nature, and at that time it had accumulated reserves of the metal equivalent to 659 tons, according to the website ExchangeTradedGold.com. Compared to the world’s total gold reserves of 120,000 to 140,000 tons, that’s very little; but, the SPDR Trust is widely considered to be the most liquid of all ETFs of this type.

There are some other pitfalls in trading gold stocks using ETFs. On the one hand, they can be taxed as collectibles, even if there is no investment in coins or numismatic or jewelry value. There is also no ownership of the actual solid item by the shareholder. But this is what the IRS said in 2008: amazing, isn’t it? On the other hand, there is a risk for you, the shareholder, which has to do with the risks of the company rather than the actual price of gold on the open market. And there are a lot of fees on these funds – you might like that your gold ETF is being cut and cut to death.

Therefore, you can look into doing this type of stock futures trading specifically for this metal. Futures have low expenses: You pay a premium up front to buy a type of contract that, for a temporary period of time, will allow you to buy or sell on demand (but you don’t have to take physical delivery; your monetary results simply appear on your margin trading account). The contract is for control of a certain amount of underlying gold; The premium you pay is non-refundable, but the amount you can temporarily control is much, much more than you would pay for that same premium in the form of an ETF investment, which means you have much higher earning potential for the same money. . The downside to these futures is that you can possibly lose money if you don’t know what you’re doing.

This type of stock trading is big these days as the dollar is devaluing. It could be for you!