Currency and gold represent two very different attitudes to investment. High-risk, high-profit trading versus cautious but reliable storage of wealth and consistent value. Both have their advantages and disadvantages – which is the better decision for you?
The currency market (also known as the foreign exchange market or Forex) is the world’s largest financial market, accounting for more than $4 trillion in trades each day with a dizzying range of options and forms of investment under its umbrella.
It can be hugely profitable and all kinds of institutions trade in Forex including major and central banks, hedge funds, investment companies and retail investors.
Forex trading is the most volatile of the financial markets, with much of its trading in spot trades with high risks and potentially high rewards. The markets operate 24 hours a day five days a week, with the largest volumes of trades occurring when operational hours in multiple time zones overlap.
When trading in the forex market, it’s possible to diversify your investment portfolio away from equities tied to a specific national market. Remember that currencies move relative to each other – if one is rising in value, another must be falling.
Currencies also seem to offer something of a level playing field, as the news which drives currency prices is in theory available to everyone on a real-time basis.
There are downsides to forex trading, however, which should be taken into consideration. The Forex market is often seen as corrupt and heavily manipulated, with little or no regulation and no centralised book for trading. This means that currency brokers can and will make money by playing the other side of your trade, as forex trading is a zero-sum game: if you’re making money, someone else has to be losing it.
As the market is also unpredictable and volatile, there’s also no set way to do well in the forex markets. Currency values are moved by an enormous number of different factors, and there’s no way to predict them all.
In addition, forex trading often requires high leverage with most trades made on 100,000 units of currency, magnifying profits but also magnifying losses. It’s not impossible for a small or first-time investor to make money from forex and currency trading, but the odds are very much stacked against you.
Gold investment presents different opportunities, with less of a focus on short-term profit and a much greater focus on long-term reliability.
Once the basis of the entire global monetary system, gold has been valued for millennia as a durable, reliable source of investment, one that is scarce enough to prevent the market from being flooded.
As a physical commodity, properly invested gold has value outside the banking and economic systems, making it an ideal investment for investors looking to preserve their wealth against future market fluctuations, bank failures or economic recessions. This value means that during times of economic strife the price of gold often rises as investors seek safe havens for their money.
Gold has also been one of the highest-performing asset classes in the market since the 1980s. Between 2012 and 2015 it saw nearly a 400% increase in value, with an average return of 15% per year over the last 10 years.
While it might be harder to “get rich quick” from gold investment, this is not the objective for those that choose it. More prudent investors value it for the stability and peace of mind it brings.
Conversely, global uncertainty means that it’s an excellent time to invest in gold.
Gold peaked during the economic woes of the 1970s and again after 2008, and the gold prices are still relatively high (although prospective buyers are still buying at a 25% discount compared to 2008). The demand for gold is also strong and looks set to remain that way, meaning that it’s ideal for long-term investment or as a short-term form of investment.
While the currency market does provide higher potential profits, there’s no substitute for the stable, sustainable and convenient profit that gold affords. Gold also holds tax advantages, and it’s easy to liquidate, and there are much more regulated systems for gold trading than currency.
Even if you aren’t looking for a secure, hands-off investment, physical gold is a much safer bet than currency as a form of investment, and in this climate safety will be a major concern for the investor.
HOW TO BUY GOLD & SILVER
Our Simple 4-step process makes physical gold and silver investment easy.
One of our dedicated specialists will work with you to identify which products are available to you and will benefit you most. The length of the consultation is down to you and is an opportunity to ask us as many questions as you like.
When you feel confident that you’ve had all your questions answered, you will be asked to complete a purchase order, which is your instruction to purchase metals.
In order to lock in the price and complete your order, you must then make a payment, via bank transfer or personal cheque. For smaller orders we may accept debit or credit cards.
STORAGE AND DELIVERY
We can either deliver your gold directly to you, via our complimentary insured delivery service, or you can choose to have your gold safely stored, in a London Bullion Market Association (LBMA) vault, where your physical metals are allocated in your name and with full insurance provided.