The cash-for-gold trade may offer quick returns, but why not trade gold in the convenience of your home or office? Or, if you prefer to be spoon-fed, have someone manage a gold-backed financial instrument for you.

Against the background of massive gains in world gold prices, persons seeking to profit off the precious metal have sprung up around the Corporate Area in recent months, waving wads of $1,000-bills and offering “cash for gold”. And why not? Gold was selling for less than US$300 per ounce at the turn of the millenium and now exceeds US$1,000 per ounce — Gold for current delivery closed at US$1,089.50 per ounce Friday on the New York Mercantile Exchange. Gold investments returned 24 per cent in 2009 and in the last five years alone, prices have jumped more than 150 per cent.

According to Stocks & Securities Limited (SSL) research analyst, Kimberly Thelwell, in the short term, the outlook for gold is bullish and “…the expectation is that if there is a pullback, the price is not expected to fall below US$1,000 per ounce.”

You can get a piece of the action without ‘mining’ for gold in old family-owned dressers and looking for dealers to sell to on Kingston street corners. All you need is a computer and a few dollars to become directly involved. Do this by investing in gold through a licensed broker with access to the commodities market.

At SSL, Thelwell told Sunday Finance, investors may purchase gold bullion outright or hold a position via a gold exchange traded fund (ETF), which reflects the performance of the price of the bullion. Varying from company to company, fees and commission are charged for trading in gold ETFs.

“In general, rather than storing gold in its physical form, investors receive gold certificates (electronically), also referred to as certificates of ownership,” explained Thelwell. “With regard to gold ETFs, the SPDR Gold Trust (NYSE: GLD) is one of the most well-known gold ETFs, which trades on the New York Stock Exchange. SSL recommends this ETF for those looking to invest in gold.”

Thelwell, in highlighting the type of US dollar profits one could have realised had they invested in the precious metal a year ago, said the GLD had produced an annualised return of 16.08 per cent up to Thursday.

“If one purchased gold (bullion) on the Chicago Mercantile Exchange on the same date, the return would have been approximately 13.62 per cent,” she added.

Alliance Investment Managment offers a software where one can trade by themselves on the market. Open a cash account for US$1,000 or a margin account for a minimum US$2,000 to get access to the platform.

If you are thinking about investing in gold, however, financial advisors warn that one must understand what makes gold prices move. In times of economic crisis, gold prices usually move up as investors buy gold as a hedge against the US dollar. When the US economy is doing well, it is said, gold prices usually trend downwards.

Thelwell explained, subsequently, that the price of gold generally moves in the opposite direction to the US dollar — although recently it has not been following this trend.

“Over the past few days, increased physical demand for gold — primarily due to the Chinese New Year — has pushed the price up. Additionally, the uncertainty surrounding euro-area economies has driven the price of gold recently as investors tend to look to the commodity as a safe haven amid market uncertainty,” she noted.

But before you go spilling the cash to invest in gold, take heed: Thelwell, although bullish on the short term prospects of gold, warns that over the long-term, the outlook for the commodity is bearish given historical trends.

Quoting a famous statement by billionaire investor Warren Buffett, Thelwell said: “Gold gets dug out of the ground in Africa, or some place. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”