Raising Funds through Gold Trading

With the development of the financial markets during the 1980s and the 1990s, gold gradually receded into the background as an investment option. However, over the last few years, there has been a striking increase in buyer interest in gold, particularly with the advent of the global recession. Consequently, gold prices have been increasing steadily. The precious metal reached a fresh high of $1231/ounce at market closing on May 11, 2010. For the week ended June 18, 2010, gold closed as high as $1250/ounce.

Benefits of Gold Trading

Gold trading can be an effective buying option, primarily because gold prices are not significantly altered by economic conditions. Gold has the ability to be a safe and reliable means of increasing profits through buying precious metals. Other advantages of gold trading are:

• It accompanies small commission charges. However, this commission varies on the service level of the broker.
• It does not involve too many paper formalities, unlike other trading options. Hence, gold trading is a quick and instant buying option.
• It offers high leverage (in the paper market).

Gold Trading Options

Bullion coins are a popular option for gold trading. These coins, issued by governments around the world, have varying gold content, which affects their pricing. Note that bullion coins are not the same as numismatic or rare gold coins. The value of the latter essentially depends on its bullion content, quality and rarity.

Other popular gold trading options are:

Gold Bars
Gold bars may be purchased in varying sizes and weights, ranging from as low as one gram to as high as 400 troy ounces. According to Gold Bars Worldwide, 94 accredited gold bar manufacturers in 26 countries produce over 400 types of bars. These bars normally contain a minimum fine gold content of 99.5%.

Gold Certificates
Gold certificates were first issued by the US Treasury around the same time as the civil war, up until 1933. Denominated in dollars, gold certificates were a component of the gold standard, which could be traded for a proportional value of gold. Nowadays, gold certificates are issued by banks, particularly in Germany and Switzerland; enabling investors to hold gold without taking actual physical possession.

Gold Futures
Gold futures are basically commitments to take or make delivery of a specific purity and quantity of gold on a predetermined date at a definitive price. Investors can take possession of gold futures by making an initial margin deposit with the broker, which is actually a fraction of the net price of the underlying gold the contract. This helps investors benefit from high leverage. Gold futures are traded on regulated commodity exchanges, including the New York Mercantile Exchange, the Chicago Board of Trade and the Tokyo Commodity Exchange.

Gold Trading: Current Trends and Outlook for 2010

According to the World Gold Council, the demand for gold is likely to be strong during 2010, primarily driven by escalating demand for jewelry in India and China. In the first quarter of 2010, consumer demand in India surged by a mammoth 698% to make the net demand worth 193.5 tonnes. In China, the demand was more resilient, which managed to increase by 11% to 105.2 tonnes.

The high demand for gold has also been fueled by the economic instability in the US and the sovereign debt crisis plaguing the European Union. Concerns over debt contagion in Europe has triggered the appeal of gold as a safe haven, particularly gold coins, bars and exchange traded funds (ETFs). On May 20, SPDR Gold Shares held a record amount of 1,200 tonnes, valued at a significant US$46.88 billion.