A beginner’s guide to gold: Price, uses & market overview

Explore a thorough overview of the gold market, learn how it works in simple terms and get to grips with its significance as a popular global commodity.
By:
Updated: Mar 18, 2024
Listen

Trade your favourite markets with our top-rated broker, Plus500.

4.5/5

CFD service. 82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

Visit site

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 section

Gold 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 jewellery, for coins, and in 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 specialised 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 section

Gold 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 section

Yes, 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 decentralised 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 jewellery, 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 section

You 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 specialised approach, the best gold trading platforms offer easy access to a range of gold trading options. 

Some let you buy physical gold, others let you trade gold, and many are designed for investing in the metal. Visit our dedicated guide to discover how to invest in gold.

Gold in your investment portfolio

Copy link to section

A 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 section

Gold 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. 

FAQs

Copy link to section
What is the market for gold?
Where does the UK get its gold?
Where does the United States get its gold?


Sources & references
Risk disclaimer
Prash Raval
Financial Writer
Prash is a financial writer for Invezz covering FX, the stock market and investing. For over a decade he has traded spot FX full time while... read more.