A brief look at headlines makes one thing become quite evident; global economies have been experiencing a COVID-19 induced plummet.
As contractions in the global economy set the backdrop to the third quarter, it is safe to say many investors are beginning to feel the sting of the pandemic.
Though, as the old adage goes to say, “Buy low, sell high”; and there certainly hasn’t been a low of this magnitude in recent memory.
All of this, while concerning to those that have not tested their grit against a down market, is bolstering the place of reliable investments over higher risk opportunities.
All of which leads up to our new series of Market Matchups in which we pit two investments against each other to declare a winner.
This week, we are putting the standard in value, gold, against tried and true forex to determine which offers investors the best opportunity during the current financial climate.
For simplicity’s sake, we will only be looking at gold as a commodity and not so much as ETFs or XAU as it trades within forex marketplaces.
So with that in mind, LET’S FIGHT!
The Gold Standard In Trading & Value
In one corner, we have the investment that has set the standard for value, gold.
As a mainstay of diversification from bonds and stocks, this commodity boasts an impressive track record that speaks for itself.
A breakdown of the stats:
- Currently valued at $1,748 as of writing.
- Upward trend in average value over the course of the last four quarters.
- Offers investors a hedge against inflation.
- Relatively insulated investment against economic downturns.
- Easy to invest within without much market knowledge necessary.
Now, a look at potential weaknesses:
- Offers no passive income generation.
- Does not experience the same growth levels over large periods of time witnessed within other investment opportunities.
- Can be difficult to scale investments.
While gold has been shown to increase in value at a slower rate than its competitor, given the downturn of economies across the globe as well as the real threat of recession, in this matchup slow and steady may win the race.
Forex Jumps Into The Fray
In the other corner we have the “almighty dollar.”
Though, in this case we will be looking at currency as a whole rather than a single nation’s contribution to the forex market.
A breakdown of the stats:
- Allows for the hedging of investments with multiple trading pairs available.
- Offers liquidity and an ease of transfer that some investment options lack.
- As the largest trading market, forex benefits from a sheer volume of assets that allows for continuous trade.
- Highly profitable if done correctly and with intent.
Now, a look at potential weaknesses:
- The market as a whole is very volatile and thus making forex a high risk investment.
- Is vulnerable to national, political, and economical turmoil.
- The learning curve can be steep for those that are new to market.
So, while forex does have a higher risk potential than that of its competitor, its ability to generate profit at a higher rate than gold does give it a slight advantage in the eyes of traders that want immediate results.
Round 1: Investment Insulation
Given that COVID-19 is currently wreaking havoc on global markets, round one will be decided on the ability for an investment to remain insulated from outside influence caused by global turmoil.
In this aspect, forex will find itself at a disadvantage as one its pitfalls is its susceptibility to crisis and recession. Granted COVID-19 is forcing both of those categories, this leaves gold with an obvious advantage.
So, with the results of this round being solely based on an investments ability to withstand outside forces, gold is taking round one with a slight edge.
Going into round two, that edge might become its detriment.
Round 2: Possible Profits & Capitalizing on the Moment
While round one focused on the stability of the two investment opportunities, this round will go to the investment that is best poised to take advantage of market shifts to provide the greatest possibility of profits.
As the current crisis has caused waves of volatility throughout markets, this volatility does provide savvy investors with opportunities to profit.
With that in mind, when looking towards gold’s stability in the face of market turmoil, this asset within the last round becomes a weakness.
On the other side, the volatility and nature of forex trading allows investors the opportunity to turn turmoil into profit, though, at great risk.
So, to the gold goes the loss.
Round 3: Banking on the Learning Curve
In the final round, the winner will be determined by an investment’s ease of entry in terms of entering the market as a new retail investor.
This is done by taking into account the necessary funding to begin trading within the market, the steepness of the learning curve, and the potential pitfalls mistakes can wreak on an average investor’s portfolio.
Looking towards gold, the first criteria can become a bit of a non-starter for those with a smaller amount of funds to invest.
This gives an early lead to forex within this round.
But when taking into account the later criteria, forex’s weaknesses begin to put a damper on its advantage.
As an investment that requires a bit of knowledge, offers a steep learning curve, and punishes mistakes at a higher rate than its competitor, forex will cede that advantage to gold for this round.
The Final Tally
After three rounds and a healthy dose of deliberation, the winner is…
Given the criteria for this matchup involved investing during a crisis, for the average investor gold offers a safer investment option during market downturns.
That said, for those with the ability to read the market’s fluctuation and determine possibilities of profit, forex remains the better option for growing an investment at a quicker pace.
Luckily, for traders that prefer to play it safe and those that want to grow their investment against volatility, the Level01 App allows traders of all levels to utilize their investment in a platform developed with ease of use in mind.
From receiving real time predictions of win/loss ratios powered by AI to the ability to trade options across multiple markets, the Level01 App is bringing DeFi to all.