Gold Trading and Investing Strategies

Since there are so many ways to invest and trade in gold there are many great gold trading strategies that can be used to not only hedge your existing gold positions in the market, but to profit as well.

You can enter the gold market in any number of ways. If you want to own physical gold you can always buy gold bullion coins such as the American Gold Eagle, the Krugerrand, the Mexican Gold Libertad, the Canadian Maple Leaf, etc. Obviously thoose interested in owning gold are bullish the gold market.

Other ways to enter a directional trade in the gold market include buying and selling gold stocks, gold ETF’s, gold futures, as well as buying and selling options on each of these financial instruments. When we speak of entering a directional trade we mean that you will buy a financial instrument if you believe the price of gold will increase and you will sell short a financial instrument if you believe the price of gold will decrease.

Besides strickly directional trades there are defensive moves for those who are long gold. These defensive strategies are designed to to minimize your downside risk if and when the price of gold declines. One such example is to sell covered calls on gold stocks. By doing this you will collect the premium on the call options and if the stock moves downward the premium you gained from selling the call options will serve to offset your decline in equity from the declining stock price.
You also have other strategies you can employ to hedge your long gold position. You can buy a short gold ETF, such as the ProShares UltraShort Gold ETF, which will actually increase in value as the price of gold declines. Alternatively you can also sell gold futures contracts whose value will increase as the price of gold decreases.

As you can see you have a great deal of flexibility when it comes to trading and investing in the gold market. The combinations of the different financial instruments coupled with the numerous trading and investing strategies creates great opportunities to profit in the increasingly popular gold market.