Options for Gold Traders

Gold traders have been witnessing a bull market, with the global demand for gold surging 36%, or by $29.7 billion, in the first quarter of 2010, according to the World Gold Council (WGC). Demand for gold ETFs (Exchange Traded Funds) has spiked 540%. According to a WGC report, the demand for gold is expected to be bulling in 2010, backed by spiraling jewelry demand in India and China.

Gold Traders: Investment Options

There are several ways to invest in the gold market, which makes it necessary to comprehend each option and find the one that best suits one’s needs. Gold traders commonly deal in the following options:

• Gold bullion bars: Available in different weights, with varying gold and alloy compositions, gold bullion bars are the purest form of the metal. Consequently, the price of gold bullion bars tend to be very high, which as of the end of June, 2010 was around $1,242.

• Gold coins: These are minted by several countries. The US Mint gold coins, such as the gold Eagles, are the most commonly traded options. According to the WGC, 28,000 half-oz Eagles were purchased till mid-June 2010.

• Gold jewelry: The price charged by gold traders on jewelries depends on the gold content as well as the craftsmanship. Jewelry investment has become popular, with a market size of $613 million in the US alone, according to US census data - 2010.

• Gold Exchange Traded Funds (ETFs): Purchasing gold ETF is similar to investing in a regular stock. ETFs enable investors to paper trade the physical bullion. However, most ETF gold traders charge an annual account fee in addition to transaction charges. Gold ETFs have flourished since April 2010 due to the European fiscal crisis. On May 20, 2010 SPDR Gold Shares held a record of 1,200 tonnes, valued at US$46.88 billion.

Finally, gold traders can invest in the yellow metal by purchasing the stocks of a gold mining company. Gold trader invest in gold mutual funds with the intention of diversifying their risk on gold stocks. These entail investing in multiple gold or other precious metal mining companies.