Tips on Investing in Gold Options

Alicia Badilla By Alicia Badilla, 23rd Nov 2011 | Follow this author | RSS Feed
Posted in Wikinut>Money>Investing

I am in Australia and I want to buy physical gold or invest in gold derivatives like option contracts or CFD's...How do I go about doing that?

How do I find a gold broker to invest in gold options?

Very good question and here is the answer...Many have been looking for quite some time on how to get in on the gold boom. Those looking into options are not alone. To find a broker is not an easy process and to find a quality broker is harder yet. Find out more on how to Invest In Gold Options as an Australian citizen by reading the below tips.

14 Key Ingredients to Verify Before Going to Your Bank to Fund a Managed Account to Invest in Gold Option Contracts:

1. Speak with your broker. Anyone can copy and paste an answer to an email from distant outsourced labor center. Make sure you are dealing with a real human being and not just a salary paid grunt. Ask questions and get answers then once you have the relationship formed from actual conversations emails are okay but ask to follow up in person rather than just email back until you get to know who you are dealing with.

2. Look for a broker that has direct ties in the country where you will be buying from or investing in. For example, if you are looking to trade Gold Options on the US market then you should be looking for a US broker. If you are looking to get into the UK market then you shouldn't be talking with someone in India.

3. Ask your broker how the money flow works. Where will your money be held when it is not in the market and what banks and counter parties will your funds travel through to get in and out of the market. When investing in derivatives like buying gold option contracts, make sure your counter party or brokers clearing firm is registered and listed with all the major regulatory agencies in the country where your funds are entering the market. If you are in the UK or AU your government won't like you moving your money outside of the UK or AU for anything so keep in mind if your broker isn't in the UK or AU then they won't be registered with the local exchange authorities and commissions or SEC. If you are going to Invest In Gold Options In Australia then you need an international broker because there is not an options market for gold in Au like there is in the USA.

4. Hunt tirelessly for tax advantages. Pay attention to the country where your customer account funds and information will be held. The best of the best banks to work with are Swiss & Costa Rican. Although Swiss law has been changing recently to the advantage of the US Government, Costa Rica and even Panama is still great. These countries are the most tax advantageous to use as a bridge to the international market. The banking in these countries is far superior to that of the UK or AU because of the privacy laws.

5. Be wary of a broker who doesn't provide you with an "all possible scenario" legally binding Client Customer Agreement Documents to sign.

6. Opening up an account to trade gold options is just like opening a bank account. Be wary of a broker who doesn't ask you for a valid government issued ID showing your signature matching the documents you sign. They should also ask for further proof of residence like a utility bill showing your address or a bank reference.

7. There should be a rigid compliance approval process that will make sure you are qualified for high risk trading and upon request a record of that should be able to be provided to you.

8. Run from a broker who gives you a guarantee on any amount of funds you are putting into derivatives. High risk investing is just like playing roulette, if you put it down you have to be prepared to loose it all. There are no trading strategies that can give you guarantees so if you meet a broker who away.

9. Look for a broker who is interested in your financial profile. It is just like getting sick and going to see a doctor..... if the MD doesn't give you an evaluation and ask you any questions before prescribing you something, you run the risk of death. Financial death can also occur if you have a broker just interested in a commission and not interested in your age, income, savings, debts, dependents, other investments and most important your financial goals.

10. Number of years investing is not relative for your broker. This market is ever changing and just because someone has done well over the last 5 years doesn't guarantee anything. It doesn't matter how good of a shot you are if your sights are off. Don't let a broker make you focus on the number of bulls eyes he has hit in the past but rather verify yourself to see that his scope and sites are working properly. It may emotionally make you feel better to have grandpa trading for you but I would recommend you look for a broker in the same kind of way you would evaluate an online date. Make sure they like you and you get along well, integrity and good communication is key. The most important ingredient in finding a broker is looking at all the above and below tips I'm giving in this article. Your investigation of the Managed Trading Account your Broker offers you MUST meet ALL the above and below criteria. A resume this day and age doesn't really guarantee anything or mean much. So they worked for JP Morgan....who cares?

11. You don't want to be treated like a number. Look for a small specialized company. If the company you are looking for is too small and they just have a hammer to work with then you will notice that they look at everything as a nail. They should have a variety of traders and analyst who monitor different commodities as a specialty. As a rule of thumb, five different areas is on the low end and 10 is on the high end.

12. If you are interested in a certain area of investment or want to Invest in Gold Options, make sure you look at all your options. Within the realm of gold there are hundreds of different types of brokers and traders that can help you. First look at the risk level for the type of trading you are interested in and seek advice on how much of your risk capital should be where. Sometimes trading too much low risk can be just as dangerous as trading too much high risk. Look at what happened with the AU Super Funds...some lost 40% or more and some of those who had 5-15% of their portfolio in a different market and were diversified were able to weather the storm at a break even or even come out ahead.

13. Don't be emotional about investing in gold options, a local fool or racist! It is human nature to want to invest with someone who is just like you, from your town and in your own back yard. If someone is sitting at a desk in front of you or knocks on your door it is not the norm. With today's technology your broker probably will be in contact with you on the phone and email. Any other change to that model is out of the norm and you should be wary of that. You may find a lawyer in the emergency room and he is there in front of you but chances are he is an ambulance chaser for a reason. Look for a broker online. More competition creates better companies, sharper companies and more specialized companies. If you go to the local mom and pop shop because emotionally it feels better then your investing is outside of logic and objectivity and you shouldn't be calling the shots. The old saying a fool and his money are soon parted applies here. There are two ways to stroll easily through life, one is believing everything and the other is not believing anything, both involve a lack of thinking. Do your research and find the best place to park your money, not the most comfortable.

14. Be wary of your Federal Government and the investment advice they give you. Whether they are cognizant of their role in society or what their puppetry perpetuates, the design of the tax man is to find a way to keep you down. The sooner you realize this the better. They will do most anything to bring funds into your country and everything to keep you from sending them out. The world is full of labels and boarders but this new thing called the internet is tearing all that fake stuff down. Make some money investing in gold options and have some fun!!

What Type of returns are realistic for a high risk managed options account?

In a high risk market and with they type of volatility we are now seeing in gold the profit potential in options is phenomenal. It is literally unlimited. A good goal to have would be a yearly 50 to 200% return above and beyond fees but with the risk of walking away loosing at most 100% To Invest In Gold Options In Australia it is not like outright futures where you can loose more than you have invested. Your risk is limited to the amount paid for fees and premium.

How to invest in physical gold in Australia as an alternative to choosing to Invest In Gold Options In Australia...

-When buying physical gold I recommend purchasing 1 ounce minted bars direct from a large reputable broker like the Perth Mint. It is easy to fly from NSW to Perth on Quantas and remember to bring cash. Don't be lured into buying limited edition coins and such, just look at it for the value of the bullion and the ease of selling again. Be prepared to pay up to but not over 5-7% above the weighted cash price. For example, right now gold is trading at $1,693 per ounce and you can buy the 1 ounce minted bar at the Perth Mint for $1,781.52. Don't look at it as loosing 5% immediately on an investment but rather ask yourself: At some point in the future is gold likely to trade again around the $1,650 to $1,750 level? If the answer is yes then you have protected 95% of your wealth. Look at the real purchasing power for the USD or the AUD and inflation. The biggest evaporator of wealth is governments printing more money..your account may still be 100,000 USD or AUD but if the purchasing power has gone down by 50% because of inflation your loosing big and don't realize it.

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author avatar Buzz
24th Nov 2011 (#)

Your business acumen is truly remarkable, Alicia. Great analysis.

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