There is currently a strong global market demand for gold, which makes trading OTC bullion a viable investment opportunity. A bullion is gold (or silver), and is legal tender which is held by central banks in reserves or used by institutional investors. About 20% of mined gold is being held by central banks around the world, and the bullions are used to settle international debt or to stimulate the economy.
When it comes to OTC trading, the over-the-counter market is a decentralized market that doesn’t have a physical location. OTC trading provides confidentiality, due to the fact that transactions are conducted only by the two parties involved.
While paper gold gets traded on public future exchanges, the physical bullions are traded within the OTC market – the London gold market being the largest one when it comes to OTC transactions. One benefit of trading OTC bullion is the fact that it offers confidentiality as many investors don’t want the data on their positions to be publicly available.
There are various reasons as to why people make gold investments; one of them being that gold is seen in some cultures as a form of saving and wealth, while other individuals use it more for its financial hedging qualities. Gold investments, especially in Western countries, are driven by fear of inflation, and by investors who want to own an asset which isn’t correlated to the stock market in order to balance their portfolio. A fall in the stock market tends to result in more buying, and whenever inflation rises or interest rates fall, investors begin looking into making a gold investment.
Investor interest in gold continues to grow around the world, with the price rising to $1,000 oz since the turn of the century. It can be easy to forget how diverse the market for gold is, with significant trade occurring in America, Germany, England, Hong Kong, as well as other parts of Asia, and the Middle East. A primary advantage when it comes to trading gold is that it carries cultural significance worldwide – as opposed to holding shares in a company where the stock can become subjected to media coverage.
Gold investment is also driven by the excellent liquidity that it provides. The ease with which you can buy or sell an asset is a main concern when you’re making an investment. In the case of gold, due to the fact that $100bn gets traded daily, gold investment is one of the easiest assets for investors to buy and sell everyday.
Gold is a safe haven when it comes to investors that are worried about a stock market crash. Historically, when the stock market declines, gold tends to rise a bit more than fall. Although the price of gold initially fell in 2008 because of the financial crisis, it managed to rebound and ended the year up by 5.5%. While Gold and the stock market are not directly correlated, Gold doesn’t move the opposite way every time the stock market goes down a bit. Historically you can see that when it comes to big stock market declines, gold does provide some safety.
The greater the worry is for the stock market, as the more gold gets sought after, the higher it drives prices. Whenever a crisis hits or a bubble pops, gold remains standing, making it a powerful tool to have in your portfolio when things go wrong with the economy. With the advent of the internet, trading became more and more simple. If you’re looking to start trading you can simply make an account with BYFX Global, fund it with as little as $100 and start investing. The leverage for spot bullions goes up to 100:1.