Imagine how much more enjoyable your life would be if you could retire early. You could spend your time focusing on what matters most to you, such as supporting your family or pursuing a hobby. Investing in gold is one of the best ways to establish a passive income stream and bring this vision to life.

Not everyone understands how to get started in the global gold market, though. We've created a brief guide with the key information you need to know before moving forward. Let's explore what you should keep in mind.

What Is the Global Gold Market?

As the name implies, the global gold market allows you to buy and sell gold internationally instead of only domestically. The three major trading hubs are the Shanghai Gold Exchange (SGE), the London OTC market, and the US futures market.

These account for the majority of global trading volumes, making them a great way to get started with international gold trading. They're essentially the crux of gold and forex trading. Let's explore these central trading gold platforms in detail below.

Shanghai Gold Exchange

This exchange was established in 2022 with close oversight from the People's Bank of China. It's seen a rapid rise since then and has become a major player in the international gold market.

The exchange introduced the Shanghai Gold Price benchmark in 2016, allowing it to establish China's role as a price-setter. This also gave the country's domestic market a significant boost in performance.

The exchange's spot and deferred contracts are complemented by futures trading on the Shanghai Futures Market. However, there is no direct link between the two exchanges.

London OTC Market

Historically, the London OTC market has been the centre of the gold trade. It attracts participants and investors from across the world. London has a unique vaulting infrastructure that facilitates its strict chain of custody enforcement.

It also houses substantial stocks of gold. These attributes have caused it to be referred to as the "terminal market."

London's time zone bridges those of the US and Asia, as well. As time passes, the exchange is constantly looking for new ways to facilitate and streamline gold trading.

US Futures Market

This exchange plays a significant role in price discovery despite London being the world's leading market. Trading activity on this exchange is focused on "active month contracts. These are the nearest dated contracts, and they act as proxies for the exchange's spot price.

Only a handful of contacts settle into gold bar delivery, but the exchange is closely linked to physical markets. It's worth noting that increasing share volume is transacted during Asian market hours. This reflects a successful diffusion into the Asian market.

Benefits of Investing in Gold

There's no shortage of investing in gold, and understanding them will help you make the best decision for your needs. From here, you should have no trouble taking your investment to the next level. Listed below are some of the most notable.

Diversification

Gold is an amazing addition to any portfolio since it helps diversify your investments. For instance, imagine you invested most of your money in a handful of stocks.

If the market didn't perform as anticipated, you could lose your contribution. A lack of diversification is one of the most significant reasons why people lose money and their investments.

It's recommended to invest in different types of gold so you aren't limited to a single income stream. Keep this in mind when moving forward so you can make better investment decisions.

Liquidity

Gold is renowned for its high liquidity compared to other investments. This makes it easy to convert them into cash if necessary. It can be frustrating to have an investment that's difficult to get money out of.

Gold's liquidity stems from it being in high demand. It's better than other precious metals like silver and platinum, as well.

High Demand

Since gold's demand is so substantial, you won't have to worry about prices falling. Long-term, gold will always increase in value due to its scarcity.

It's not unlikely that gold value will increase exponentially over the next decade due to its diminishing availability. This means that now is a better time than ever to consider this commodity.

Protection Against Inflation

Gold's protection against inflation is one of its most notable attributes. Inflation rates can be unpredictable, as we've witnessed during the aftermath of the COVID-19 pandemic.

It's worth noting that gold's value tends to rise during times of economic uncertainty, giving you an extra sense of stability when you need it most. This can keep you from being an emotional investor and panicking when your investments lower.

Easy to Sell

When it's time to sell your gold, you won't have an issue doing so due to the demand. There's nothing worse than needing to cash out your investments and being unable to. Not only can this be inconvenient, it could lead to financial distress.

For example, you might need to withdraw your gold investment to put a down payment toward a home. You might miss out on the opportunity to do so in a scenario like this.

How easy it is to sell your gold will depend on the type of gold you're investing. It will also be influenced by the platform you use. In most cases, though, it should be a smooth process.

Investment Tips

To succeed in the gold market, there are certain tips you'll need to keep in mind. Understanding these will help you avoid issues you may have otherwise encountered. Let's take a closer look.

Understand Gold Technical Analysis

All gold traders should educate themselves on this topic. It provides insight into gold's projected performance shortly. You'll also learn about the live gold price today.

This will help you better understand how your investment is performing. Keep in mind that all investments will ebb and flow. Don't be alarmed or discouraged if your performance dips, as it will likely quickly return to where it was.

Contribute Regularly

Your investment will grow much faster if you contribute to it regularly. Do your best to invest a decent amount of money each month in gold. Some people treat gold like a retirement fund and contribute large percentages of their monthly income.

Regardless of how much you invest, only contribute money you don't need for necessities. A situation you want to avoid at all costs is being unable to pay rent, buy groceries, etc. since you've invested all your income in gold.

Understand Risk

No investment comes without risk, and you must understand the risks present regarding gold investing. The good news is that the risk associated with this form of investing is minimal compared to other investments.

This is especially true regarding cryptocurrency. As long as you understand the risks associated with your investment, you can take steps to minimize them.

One of the most important tips to keep in mind is only investing what you're willing to lose. As previously mentioned, gold is a stable investment that's liable to increase in value over time. However, there's always a chance you won't end up with the numbers you anticipated.

Be Patient

Your investment will grow over time, but it may not grow as fast as you anticipated. It's essential to be patient after investing in gold, as it will take a while for you to reach your target metrics.

To help you stay grounded, do your best to avoid frequently checking the value of your investment. There's nothing you can do to make it grow faster than it already is. When you check it monthly or quarterly, you'll be much more satisfied with your results.

Understand What You're Investing in

Some people blindly invest in gold without realizing where their money is going. There are many different ways to invest in this commodity, such as bullion, gold ETFs, or mutual funds.

Each form of gold investment has different potential, and it's essential to research them before allocating your money. Otherwise, you might have issues getting the outcome you anticipate.

Have a Plan to Cash Out

When it's time to get your money, you should have a plan to cash out. Educate yourself on relevant restrictions so you don't encounter unnecessary difficulties.

For example, there might be rules the platform you use might impose certain rules that can impact how soon you see your money. There may also be delays depending on certain factors, such as the amount of gold you need to sell.

Set Realistic Goals

The best way to avoid disappointment is by keeping your goals realistic. Setting a concrete number you'd like to reach will also help you determine how much to invest each month.

Consider a scenario where you want to grow your gold investment to $50,000 within five years. You initially start with $5,000. From here, you can figure out how much you need to invest monthly based on the current value of your portfolio.

Work with a Professional

Working with the right professional plays a large role in achieving your goals. However, not all are created equal. You'll need to do your due diligence before making your decision.

Research their past reputation and see what other people have to say about their experiences. Did they have an easy time getting in touch with them?

Were they satisfied overall? The answers to questions like these will help ensure you make the right choice.

Pay attention to how they respond to criticism, as well. If they get defensive or aggressive, it's best to continue your search elsewhere.

Otherwise, you could encounter similar behaviour if you have a problem with them in the future. Pay attention to fake reviews, as well.

These are often posted in large batches and contain many of the same keywords. Ignore them when making your assessment so you can have an accurate perspective. It's essential to check their pricing structure, as well.

The last thing you want is to pay more than you anticipated. If they impose miscellaneous fees, look for other options. Do they have examples of their past performance?

Reputable financial advisors will proudly showcase their work to illustrate what they're capable of. If you aren't comfortable with them, it's recommended to look for other opportunities.

Always trust your intuition when shopping around. With enough due diligence, you shouldn't have an issue finding the right choice for your needs.

Use the Right Platform

The platform you use to invest will heavily impact your results. For example, disreputable platforms likely aren't intuitive and can make it difficult to make the choices you need. These also tend to neglect their security obligations, potentially putting your data at risk.

The cybercrime industry is projected to cost the world over $10 trillion annually by the end of 2025. A large portion of this value will come from data breaches that occur in the finance industry, especially investors. Great ways to recognize shady platforms are by investigating the website.

If it's filled with grammar errors, links to strange resources, or low-quality images, you should avoid using it. It's also important to pay attention to warnings from your web browser. For example, the browser to use could notify you that the platform's security certificate is invalid or expired.

Under no circumstances should you use platforms like these, as they could put your data in jeopardy. It only takes seconds for catastrophe to arise, such as if someone's able to steal your identity.

Some platforms also impose unnecessary fees. These can quickly add up if left unchecked. It's never recommended to use a platform that charges you for things like maintaining your account or making trades.

Don't Neglect Global Gold Investing

The information in this guide will help ensure you make the best decisions for your situation. From here, you should have no trouble tapping into the global gold market and taking your performance to the next level. Just be sure to invest responsibly.

Looking for other finance articles that can help you out in the future? Our blog has plenty like this one you can learn from. Be sure to check them out today!