According to a report published in 2011 by the World Gold Council, gold trading and global demand for gold in the third quarter of 2011 increased 6% year-on-year to reach 1053.9 tonnes, up from 991.9 tonnes in the third quarter of 2010. Additionally, global gold investment reached 468.1 tonnes in the third quarter of 2011, up by 33.1% from the corresponding quarter in the previous year.
Gold is likely to continue to be favoured by investors in 2012. A poll conducted by Nomura, a Japanese investment bank, revealed that 19.5% of the 164 poll respondents said that they would invest in gold and hold it till the year end. The second most favored asset was stocks, with approximately 13 percent responses in its favor.
History of Gold Trading
During ancient times, gold was used as a means of exchange. Since its discovery, it was majorly used in jewellery making, because of its aesthetic appeal and rarity. Over time gold became a representation of social status, and began to be used for creating political power and settling trades.
In early 1970s, under the leadership of President Nixon, United States closed the gold window and lifted a 41 year ban on private ownership of gold by US citizens. This allowed individuals to trade gold for profits. Ever since, gold has become a popular component of individual and business portfolios.
Gold Trading: Factors That Influence Gold Prices
The price of gold, like most commodities, is subject to the supply and demand scenario. Speculation in the global market also significantly influence the direction of the price movement. Some other factors that are responsible for the movement in gold prices are:
• Demand for jewelry: Two thirds of annual gold production is intended for manufacturing jewelry. And, in the third quarter of 2011, global gold jewelry demand was a staggering 465.6.
• Bank regulations: Central banks of various countries, depending on the nations’ financial stability, limit the sale of gold to other nations. These regulations can create a regional imbalance, leading to price fluctuations.
• Crisis or Emergency situations: Wars, emergencies and unstable governments inevitably cause a fall in gold prices, as people are less willing to invest during such turbulent times.
Gold Trading Opportunities
The soaring gold prices over the past few years have offered various opportunities for success in trading the yellow metal. The different gold trading opportunities include:
• Buying physical gold: If you wish to hold the yellow metal in its physical form, then purchasing gold bars and coins is a good idea. This is less risky than investing in gold stocks. However, be sure that you do not immediately need the money and that you have a long term investment perspective. It could take a few months or years for you to record a significant profit from the investment.
• Gold mutual funds: For those who do not wish to hold the precious metal in its physical form, one option is to invest in gold mutual funds. It is always advisable to invest in funds that hold stocks in well established companies. This form of investment is considered riskier than investing in physical gold.
• Gold futures: Investing in gold futures is also considered risky but since this is one of the least expensive ways of investing in gold, it has interest for some. Although the futures market is complex, there are opportunities for attractive returns to be made if you are market savy and do your research properly.
When exploring gold trading, always make sure that you diversify your investments. Avoid investing everything into one form of gold.