If your capital is 100 pounds and the price of a gold ingot today is 100 pounds and you want to invest in gold, then naturally you go and pay the 100 pounds to get the gold ingot and go.

If the price of gold rises by 10%, then you will have 110 pounds, and if it decreases by the same percentage, you will have 90 pounds.

But because humans are greedy by nature, the stock markets can exploit human greed and say instead of buying one ingot with your money, how about you put this money with me as collateral, and I will buy you 10 ingots in your name.

- Of course, it’s all buying and selling on paper without a real financial asset or gold backing this asset.

So, you only have 100 pounds with me, but you also have gold worth 1000 pounds, and you have a debt of 900 pounds.

Here, if gold goes up by 10%, then you’ll have 1100, meaning you made a profit of 100% instead of 10% in the case of real buying.

Of course, the profit will tempt you to not withdraw your money and the profit on top and pay off your debt, but instead, you put your profit in again and buy, making your debt 1800 pounds in the hope of making a bigger profit.

Here you are making an artificial demand with money you don’t actually have.

That's why the rise in gold is followed by a larger rise, a significant part of which is due to artificial demand.

Now we come to the catastrophic scenario on the other side; if gold drops by 10%, then all your capital is gone and you end up with a debt of 900 pounds.

Here the stock market will tell you, I will raise the margin or buying margin to 20%, for example, meaning you need to put in another 100 pounds or I will sell your gold right now.

In both cases, the scenario is catastrophic - especially if you don’t have liquidity - you either lose all your capital or take another risk and borrow another 100 pounds. Most people and stock markets, fearing for their money, resort to selling.

That's why the drop in gold is followed by a larger drop.

This example is for closeness and simplification, but it is a reality that occurs on a very large scale and is explained by economists under the name of financial leverage or margin selling.

This doesn't only happen in the gold market but also in real estate and stocks.

This is one of the main reasons for the collapse of the global economic system in 2008, but because of human greed, no one learns.

These are all transactions that are forbidden by law.

That's why in recent years, you find significant fluctuations in gold and silver prices.

But if you are buying real gold with real capital, don’t worry too much because the margin of profit and loss won’t be like that of speculators.

The advice here is that when you invest:

- Buy with your surplus money, not with debt.

- Diversify your investments; don't put all your money into one thing.

- Don’t be greedy chasing after huge profits in forbidden speculations that could make you lose all your money.