Gold may be in a bearish slump right now, stuck in the $1,200 USD range. But, without sounding like a gold bug, the precious metal still has plenty to offer for traders. Gold is one of the most stable long-term appreciating assets. Today, gold is trading at roughly $1,204 an ounce. If you take a look at historical prices, ten years ago, in 2005, gold was trading at around $500 an ounce level. If you go back sixty years, the price of gold was at around $35 an ounce. That’s an incredible price appreciation over the past half-century.
That’s of course good news for long-term investors of the metal. Unfortunately, current gold prices prevent many traders from being able to enter the market; after all, capital requirements to begin trading in the gold market can be in excess of $10,000 on the retail side of the market. Many private investors cannot afford this kind of capital requirement.
Binary options are a fairly new financial investment market, and what’s useful to know is that binary options provide a way to invest in gold (as well as other asset classes, like silver, petrol, the forex market, and stock markets) without relying on large capital investments.
Functionally and conceptually, binary options are fairly simple. There are several different types of binary options. However, the most common is the “high-low” binary option, also known as a fixed-return option. A binary option trader will make a purchase based on how he or she believes the market will perform within a given time period. To return to gold, if an investor believes that the price of gold will close for the day at or above, for example, $1,204 an ounce, he or she will buy a call option on that outcome. On the other hand, if an investor believes that gold prices will worsen within a given time period and fall below $1,204 an ounce, he or she will buy a put option on gold.
There are only two possible outcomes in binary option trading (hence, the ‘binary’ description). If the trader’s put or call option ends up agreeing with the market price at the end of the given time period (also known as a strike price), then the trader enjoys a return on his or her investment. If the trader’s purchase does not agree with the market price, then the trader loses his or her investment.
Unlike traditional options, there is no range of payouts based on accuracy of market projections. By the same token, binary option traders do not have to worry about things like spreads, stop losses or erratic intraday volatility. Simply put, if a trader accurately predicts where the market will go (i.e. if it will close either below or above a given price), then he or she enjoys a return on their investment.
As many gold investors know, gold prices began strong this year, rising to $1,300 in January. Since then however, gold prices have frustratingly remained stuck at the $1,200 level. What’s more, a number of analysts (see here and here) are predicting bearish trends in gold before a final bottom is reached and a sustainable recovery begins.
There are several factors making it very difficult for gold to overcome its current bearish trends. First and foremost on investor’s minds is the upcoming decision by the Federal Reserve. When will the Fed raise interest rates? Any increase in interest rates will push investors away from gold. At the most recent Federal Reserve meeting, it was made clear that an interest rate hike is still on the agenda. That should undoubtedly keep gold in firm bear territory. Still other factors are playing their part in keeping gold prices pinned to the $1,200 mark, factors like the ongoing strength of the dollar and the continued strength of the American economy.
With that said, even with a bearish gold market, one that’s now lasted for the greater portion of this year, opportunities for investment in the metal are plentiful. And binary options provide a very realistic way to make a successful investment, even in a non-volatile, bear market.
“The gold market right now provides an ideal environment for binary options trading.” This coming from Deborah Byrley who leads an interactive broker that offers binary trading accounts. “Binary option traders can focus on major indicators in their short-term analysis of the gold market. These indicators are exactly what you encounter when trading on other financial markets.“
Continuing on, “The one exception with binary options is that, due to their simple investment structure, gold investors can enjoy a return on investment, even in a bear market that is experiencing little price movement.”