High demand coupled with higher returns has resulted in more and more people opting to join the ranks of Gold Traders rather than investing in other assets, such as stocks or funds. The rapid and recurring demand for gold is because this metal is utilized for various purposes, from being used as an investment to being used in jewellery manufacturing and modern machinery. Considering the scarcity of this precious metal and its growing use as a wealth protection medium, it isn’t a surprise that the gold demand is only going to increase with time.

Why is Gold Trading is Gaining Popularity

Investment in a gold portfolio can be made in many forms. The most common way of investing in gold is by buying it in its physical form, such as bars and coins. These are some of the reasons why gold trading is becoming popular:

•    Debt crisis in Europe: The European debt crisis has made the global economy fragile. Due to the resounding levels of debt, investor markets now have to follow a cautious approach. One of the worst hit areas is the stocks and futures industry, resulting in less people investing in these spheres.
•    Growing demand: Demand for gold has increased considerably, especially in China and India, where this metal is used for many purposes (jewellery, modern machinery, means of investment, etc). The result is the rising price of gold.

•    Diversifying reserves: Gold is now being used as a means of diversifying reserves, not only by individuals and corporations, but also by central banks of different countries, which are increasingly buying this precious metal. This factor has not only created hype about gold’s security in a portfolio but has also contributed to the rise in its price.

According to World Gold Council’s report for Q3 2011, the quarterly average price of gold rose 39% from year-ago level to US$1702.12, while gold price reached a new record high of $1,895 during the period. These statistics further testify to the growing popularity of this metal.

Problems Gold Traders Face

Purchasing gold is a costly proposition and there are some factors that need to considered before one makes a purchase in gold. Here are some of the most common problems that gold traders face:

•    Lack of knowledge about the gold market: It is important that one stays aligned with the current market trends to be able to decide better the buying and selling period for gold. Also, knowing about the market prices safeguards you from fraudulent dealers who wish to make money via your ignorance.

•    Not choosing the right dealer: It is crucial that you choose a reputable dealer for your investments, in order to protect your profits as well as to ensure that the gold asset you buy is authentic.

•    Lack of patience: The biggest mistake that gold traders make is not maintaining a long view of their gold purchases. Many gold traders, in search of quick returns, sell their gold before the ideal time and end up losing a big chunk of the profits they could have gained.

It is recommended that you learn more about the market before you use your hard earned money in becoming one of the gold traders.