Trading Gold

Submitted by George Polizogo... on 25 June, 2009 - 10:03

Investing in gold is simply the best alternative that you can do today if you have nothing to do with your dollars lying idly in your bank.

Investing in gold is simply the best alternative that you can do today if you have nothing to do with your dollars lying idly in your bank. Gold is the best commodity that you can hedge on because it will be in the upswing for a long time to come. With the severe limitations in gold production and its dwindling supply in the open market and the strong demand of emerging economies, gold is indeed becoming a rarity of sorts.

Many people are still unaware of the fact about the real reason why gold is increasingly outmanoeuvring the world's big time currencies in terms of worth. They failed to realise that gold, just like oil, is a natural resource subject to exhaustion and limitations. These limitations are now being felt as evidenced by the continuing increases in the cost of a troy ounce of gold and the ever increasing cost of a barrel of oil in the world market.

Why Gold Will Continue to Play Bull

The present low supply of gold has resulted to bullish projections of this precious metal in the world market. If you look at the charts, you will come to realise that the total production of gold now compared to four decades ago, has dropped considerably by almost 15 per cent. South Africa, which has been the top producer of gold has topped its production peak and is now 30 per cent short of its output. It is projected that with the sluggish production, gold will have a field day playing bull in the market for a long time.

The Present Gold Supply Situation

The limitation in the supply of gold will be felt more as the years goes on simply because gold producers will not be able to sustain the millions of ounces mined every year. This is because new and vital discoveries are not considerably followed up since gold mines takes a long time to build and the cost are just too high to shoulder. It is further estimated by experts that the stage is set for a coming gold shortage. They said that at the current production rate, there is indeed a strong possibility that gold reserves will be depleted in 15 to 20 years.

Gold is increasingly in demand especially in countries like China and India. It is very likely that the price of gold will continue to rise and will become the darling of trade speculators in the world market. In terms of opening up new mines to improve supply, however, experts agree that even when gold hits US$ 1,000 an ounce; it will still take a very long time just to open one single world class gold mine. A world class gold mine can take more than 10 years or longer to fully operate.

The Demand for Gold

There are three sectors where gold plays an important part. These are the jewellery, retail investment to include government gold holdings and the industrial sector. All of these areas were able to exhibit new demand heights last year and are still forecasted to even surge more for this year and even for the coming years. Global demand for gold use in the jewellery sector showed the strongest surge in the precious metal markets of India, China, Turkey and the Middle East.

The growing economies of India and china are putting more pressure to the price of this precious metal because of their growing need for this commodity. The Middle East likewise seemed to reawaken their hunger for gold as their earnings from oil continues its soaring flight.

India, now considered as the world's biggest gold market, was able to achieve the highest records in the two sectors of jewellery and retail investment. In terms of tonnage, India's total demand for gold was equivalent to more than half of the world's total mine output for the quarter last year. Russia on the other hand, recorded last year it's highest level of gold jewellery demand.

Thus, in a nutshell, gold today is one of the best performing commodities that you can find in the market for a worthwhile investment.

George Polizogopoulos is a staff writer for MyShareTrading.com, an information hub for share trading including forex trading, derivatives, options, warrants and CFD Trading.

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