Which is better investing in gold or stocks?

Which is better investing in gold or stocks?

Both stocks and gold constitute a vital and popular financial asset in the global financial markets.

That is why it was natural and logical that the question about the best option between them is one of the most frequent questions, both among those wishing to enter the world of online trading around the world.

However, the answer to the question may not be as simple as asking it, but it requires a close look at both of them to get to know their distinctive characteristics and the advantages and disadvantages of each.

Investing in gold

Gold is one of the most valuable metals on the planet and the history of dependence on it for saving, trading, and investment dates back to pre-Christian times.

It was not much different from what it was in our contemporary times, despite the huge booms witnessed in our time, most notably the emergence of online trading mechanisms, gold has retained its position and represents one of the most attractive financial assets for traders in the world.

Why is gold called a safe haven?

Time has been known throughout the ages and for centuries as one of the best financial assets. It has always been synonymous with wealth and a good life.

The economic importance of gold lies in its ability to maintain its value and its superior resistance to sharp changes and fluctuations in the financial markets.

It is precisely from here that it acquired the nickname of a safe haven; For decades, millions of people used to keep their money in the form of bars or gold jewelry to protect its value.

The gold metal is not only a safe haven for individuals but also for people and countries.

The value of gold - as a safe haven - became evident in the aftermath of World War II, specifically in 1944 when the great powers concluded the Bretton Woods Agreement, which sought to stabilize the exchange rates for an ounce of gold.

The aim was to achieve a state of stability for the global economy as a whole.

Advantages of investing in gold

The first and most prominent advantage of trading gold is that it is one of the most sought-after financial assets in the world.

The volume of global demand for it during the first quarter of 2021 only amounted to about 815.7 tons.

This leads us to many other advantages that make it in the esteem of many the best investment option, especially via digital trading:

  • It enjoys greater stability compared to the volatility rates of other assets.
  • It can be relied upon as a hedge against inflation.
  • Ease of analyzing gold prices and anticipating its movements, as it is related to the pricing of the US dollar.
  • Historically proven to be the most superior and resilient financial asset in recessionary periods.
  • There are many mechanisms for investing in gold available online.
  • The possibility of exposure to gold prices and benefiting from them through investment funds.

Disadvantages of investing in gold

On the other hand, there are some disadvantages or negative aspects associated with trading gold, which must also be taken into consideration and can be summarized as follows:

  • Direct and extreme influence of geopolitical conditions.
  • It does not generate any direct cash flows (returns/dividends).
  • It is likely to decline in the event of any increase in the volume of mine production.
  • Gold trading requires constant study and continuous follow-up of political events and economic conditions.

How can gold be traded online?

The process of trading gold online - or trading precious metals in general - means speculating on its prices, that is, without the need to physically own the financial asset.

The trading process is carried out by more than one mechanism, most notably the following:

  1. Gold futures contracts: They represent the main method for trading the metal, which is an agreement to trade - by buying or selling - through a predetermined price, provided that the transaction, i.e. the contract, is settled at a future date. US Markets The benchmark futures contract is 100 ounces of gold.
  2. Spot gold trading: The name of this mechanism indicates its complete dependence on trading the value of the gold metal at the same moment. This option is suitable for those who prefer short-term trading strategies, and of course, depends on the ability of the trader to anticipate the trends of gold prices within a small time range.

The foregoing represents the direct ways to trade gold via the Internet, or rather the direct methods, while other methods are added to them that can benefit from indirect gold price movements, which are:
  • Gold shares: This term refers to the trading of shares of companies active in the field of mining, especially gold prospecting.
  • Investment Funds: You can also benefit from gold prices by buying and selling ETFs, which include a group of major gold-producing companies around the world.

Stock trading

Stocks are originally one of the means that companies resort to to raise the value of their capital or provide greater flows of cash.

This is achieved through the purchase by investors of its shares offered in any of the global stock exchanges, and the shares of companies were and still are among the smelling financial assets.

Stock trading has witnessed more popularity now after the emergence of online trading mechanisms, which made it available to a larger segment of investors around the world.

It depends on trading the value of shares without actually owning them as a financial asset, and thus it has become one of the suitable investment aspects for people with small and medium capitals.

Advantages of online stock trading

The attraction of a large segment of investors to online stock trading did not come out of nowhere. Rather, it was the result of many elements of distinction, the most important of which can be summarized as follows:

  1. It is compatible with many trading strategies due to the multiplicity of stock properties available.
  2. Volatile stocks with high volatility offer the opportunity to take larger profits in the short term.
  3. Multiple ways and mechanisms of trading company shares online.
  4. An opportunity to invest in the shares of giant companies such as "Amazon, Apple, Google, Tesla...".
  5. Take advantage of the leverage provided by the trading companies to multiply the potential profits.
  6. Decreased value of fees and commissions imposed on transactions.

Disadvantages of online stock trading

The negative aspects or risks associated with online stock trading can be summarized in one main factor.

Is that the stock market world is full of sudden changes and possible rapid fluctuations, if those changes are in a direction opposite to the investor's expectations, it may cause him huge losses.

Especially in the case of reliance on high financial leverage as this tool is a double-edged sword, that is, the returns are doubled in the event of profit, but it also doubles the size of the loss in case of exposure.

Based on this, stock trading requires a permanent and continuous follow-up to the conditions of the financial market.

In addition to proficiency in dealing with technical analysis and fundamental analysis tools be able to build a solid strategy, increase the chances of taking profits, and enable him to manage risks more effectively.

How do you enter the stock market?

It has become easy to enter the stock market and access the major stock exchanges around the world. It can be completed completely through simple steps, as follows:

  • Finding a licensed and reliable trading company.
  • Learn about the types of trading accounts available and the characteristics of each one.
  • Click on the option to open a live trading account.
  • Register personal data and attach the required supporting documents.
  • Deposit the value of the capital equal to or exceeding the minimum set for opening the account.
  • Access to the digital trading platform.
  • Initiate real stock trading deals.

Conclusion: Which is better, investing in gold or trading stocks?

It is difficult for anyone to find a definitive and definitive answer to the frequently asked question about which is better to trade stocks or invest in gold.

As we have indicated, each of them has its own unique characteristics and elements that distinguish it, based on this, the preference should stem in the first place from the trader himself, according to his level of experience and knowledge of the financial asset and his ability to analyze his charts, as well as the type of strategy through which he prefers trading.

But in general, analysts consider gold to be relatively less risky than stocks.

Although the prices of both are subject to fluctuation permanently, the stock fluctuations may be sudden and more severe.

The insightful viewers believe that it is better to combine the two financial assets, as the diversification of the investment portfolio in the asset is required and in the interest of the investor, but rather represents one of the forms of hedging that is taken to protect the capital.

Some also prefer to take advantage of the advantages of the two financial assets - gold and stocks - by investing in the shares of companies working in the field of mining and gold prospecting.

Most of them are major companies with high market capitalization, including companies listed on the Nasdaq index, among them, for example:

  • Barrick Gold Corp
  • Franco Nevada Company
  • Newmont Corp
  • Royal Gold Company
  • Pretium Resources Company

What are the best times to trade gold?

Online trading transcends the boundaries of space and time and is not bound by either.

However, those with experience believe that certain times are best for trading gold, during which demand rates rise, which leads to a rise in the secret, which increases their chances of making profits and achieving the desired returns.

These are the times during which the working hours of the major financial markets around the world overlap:

  • The American / European market: these markets overlap together in the period between (13:00 and 17:00) GMT, and their importance lies in the fact that they represent 80% of the volume of transactions conducted daily.
  • Asian / European market: they overlap together in the period between (7:00 and 9:00) GMT, this contributes to an increase in the volume of activity due to the strength of the stock exchanges on both sides, especially the Tokyo Stock Exchange and the London Stock Exchange.

Can global stocks be traded online?

Online trading companies give their clients unlimited investment options.

Through its platforms, it enables them to access all major financial markets around the world, based on this, through which they can trade American and international stocks easily, and benefit from the prices of giant companies, most notably, for example:

  • Apple stock.
  • Amazon stock.
  • Tesla stock.
  • Facebook stock.
  • Boeing stock.
  • Microsoft stock.
  • Pfizer stock.

What are the types of derivative contracts?

Derivatives group contracts represent one of the most sought-after and popular online stock and gold trading mechanisms.

All of them are trading transactions of a financial asset at a predetermined price, to be settled at a future date.

These contracts take several forms, each of which has its own distinguishing elements and the most prominent types of such contracts:

  • Futures trading.
  • Trade contracts for difference.
  • Trading futures contracts.
  • Trading options contracts.

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