What You Should Know About Gold Trading

May 2011 was a tumultuous month for gold prices. The first two weeks of the month saw gold trading being impacted by the US Federal Reserve’s announcement in late April that the second round of quantitative easing (QE2) would be allowed to expire. This fueled the already existing investor fears, sending gold prices plummeting down. However, by mid-May, the debt crisis in the Euro Zone led to gold being seen as a safe haven, driving both the demand and the price up. Towards the latter part of May, however, gold prices were just below the record high of $1566/oz seen during the month of April.

Gold trading has recently received an impetus, following the announcement of the European Parliamentary Committee on Economic and Monetary Affairs that central counterparties would be allowed to accept gold as collateral. Once this decision is implemented in June 2011, gold is likely to be viewed more as a liquid asset than ever before. Of course, this is not the first time that gold has been viewed as collateral. ICE Clear Europe was the first European clearing house to accept gold as collateral in 2010. In February 2011, JP Morgan established itself as the first bank to accept gold bullion as collateral. More and more institutions are seeking regulatory approval across the world to accept gold as collateral.

With the growing popularity of the internet as a platform for gold trading, investors and traders now need to first have an online account through which they can exchange digital gold. Whether you choose to trade online or offline, you first need to choose whether you want to take up day trading or swing trading. In day trading, you will be buying and selling gold within a time-frame of 24 hours in order to avoid having to pay overnight interest charges. Swing trading, on the other hand, means that you hold on to the gold for a longer period of time, which could even extend for many years.

How to Choose a Gold Trading Company

Given the recent developments in the gold market, experts are predicting good news for the gold markets and demand for gold is likely to see a rise. If you too are thinking of foraying into the gold markets, it is important that you choose a gold trading company with care. Here are some aspects that you should look into while enlisting professional help:

• Get to know the market before you jump in at the deep end. Research online and read as much as possible about gold trading.
• Conduct an online research of brokers to shortlist the gold trading companies that you would like to choose from.
• Check the track record and reputation of the agencies on your list.
• Check the trading practices and knowledge of the agencies.
• Compare the charges across the list of agencies. Remember, high prices do not guarantee better services. Compare the services offered with the fees being charged.
• Check whether there are any hidden costs.
• Read the terms and conditions carefully and do not hesitate to ask questions before you sign buy.
• Be sure to check for any hidden terms as well.

For a positive experience in the gold markets, you need to choose your allies carefully. Experienced and reliable brokers are your best bet. Make sure you also check the client testimonials to know the kind of services and customer support offered.