When we use the term ‘speculation’, we often refer to an approach where something is bought and then sold again within a reasonably short time frame in the hope of making a profit on the transaction.
This is different from investing, which is normally associated with buying an asset and holding on to it for a relatively long period of time, also in the hope of making a profit on the deal ufabet.
Speculating on the price of gold therefore means to buy and sell gold within a relatively short time frame, hoping to make a profit. How does one go about doing this? Do you actually have to buy physical gold?
One way of trading gold is by opening an account with a spread betting firm. You can then spread bet on gold as well as a wide range of other financial markets such as crude oil, currencies and stocks and shares.
When spread betting on gold you are merely trading on the direction of the gold market. Because you do not have to purchase the physical gold this usually means that trades occur in the order of a few seconds.
After opening a spread betting account, you see that there are two prices quoted for every spread bettingmarket, including gold. These are the ‘bid’ and the ‘ask’ price.
The bid price is the level at which an investor can sell the market and the ask price is the level at which they can buy. The difference between the bid and ask prices is called the spread, which is in effect the commission of the trading company. The smaller the spread, the less commission you are in fact paying.
Spread betting is a leveraged form of investment which means that you often only have to deposit a small fraction of the total value of your trade in advance.
Each spread betting company will let clients have different levels of leverage that depend upon the market being traded. The downside is that if the trade goes against you, you can lose more than you initially deposited.
In order to help reduce your risk, most spread betting accounts allow you to add a stop loss level to your trades. This acts as an automatic order to close your trade if the market moves against you by a pre-set amount. Note that not all stop losses are guaranteed.