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A beginner’s guide to gold: Price, uses & market overview
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On this page, we explore everything you need to know about gold. Gain insights into gold market trends, pricing mechanisms, and the environmental impact of gold.
Read on to learn more about this popular commodity and find links to beginner friendly guides explaining how you can get involved in gold.
What is gold?
Copy link to sectionGold has been one of the most popular commodities to invest in for hundreds of years. It is a rare and valued precious metal that has been used throughout history for its unique properties. As a commodity, gold is mainly used in jewelry, coins, and various industrial and technological applications.
Gold has exceptional conductivity, is resistant to corrosion, and is highly malleable, making it an essential component in the electronics industry. Its reflective properties also mean it is widely used in specialized mirrors and coating for applications in aerospace and scientific instrumentation.
Many countries and central banks hold significant reserves of gold as a way to hedge against uncertainties and diversify foreign exchange holdings. According to the World Gold Council, central banks hold approximately 36,000 metric tonnes of gold of gold, accounting for around 17% of all above-ground supply.
Gold market overview
Copy link to sectionGold is a widely traded commodity, with a highly liquid marketplace that operates around the clock in various financial centres worldwide. The main trading venue for gold is the over-the-counter market (OTC), where banks, refineries, and large institutional investors transact in spot and derivatives.
One of the major hubs for wholesale trading is the London Bullion Market Association (LBMA), where benchmark prices are set. Gold futures and options contracts are traded on major commodity exchanges including the COMEX (Commodity Exchange) division of the New York Mercantile Exchange (NYMEX) and the Tokyo Commodity Exchange (TOCOM).
Is gold valuable?
Copy link to sectionYes, gold is a valuable commodity and there are numerous reasons why investors are attracted to the market. We have highlighted some of these key fundamentals below, explaining what they are and why they matter.
- Hedge against inflation. Inflation is when money loses its value over time as the cost of living increases, and administrative strategies like quantitative easing can exacerbate this. However, the price of gold tends to increase in proportion to the amount of inflation, so owning gold can help you avoid negative consequences.
- Store of value. Like decentralized cryptocurrencies, owning gold allows you to take total control of your investments by keeping them out of the banking system and away from government control. If you want to store your capital safely without having to trust a clearing house, owning physical gold or gold-backed ETFs can be a good way to accomplish this.
- A robust macro story. Gold finds its demand in a multifaceted range of industries, including jewelry, technology, banking, and speculative investment. This means the gold market can peak at different times, making it more lucrative. Gold demand hovers around 400t per year, making it the second most valuable commodity market behind crude oil.
How to invest in gold
Copy link to sectionYou can invest in gold by using a commodity trading platform. These platforms offer a range of commodities and are very easy to use. There are different platforms suitable for specific requirements. For a more specialized approach, the best gold trading platforms offer easy access to a range of gold trading options.
We also have a dedicated guide on how to invest in gold as a beginner, detailing your options including buying physical gold bars or trading gold using numerous trading instruments, like futures or options contracts, ETFs, and more.
Gold in your investment portfolio
Copy link to sectionA diverse investment portfolio can help protect you during market uncertainty, and the inclusion of gold can add value while allowing you to spread your money across various markets.
Gold often moves independently to traditional investments like stocks and bonds. You can include gold in your portfolio as a hedge against potential losses. During times of economic uncertainty, investors view commodity metals such as gold as attractive options.
Gold’s long history and the fact it held by almost every central bank in the world, makes it a good long term play.
Gold vs other commodities
Copy link to sectionGold is part of the precious metals family of commodities, including silver, platinum, and palladium. Each commodity is unique in its own way and offers different features for investors and traders. You can learn more about specific precious metals using our dedicated guides below.
