Trade Gold Online

Trade Gold via an ASIC Regulated Broker

Trade gold online alongside silver, WTI, Brent, indices and forex markets. Harness the power of MT4 and access over 50 tradeable markets across all popular devices, with fast execution and an ASIC regulated broker.

A Primer on Gold

A rare earth metal, gold sits at the top of the precious metals group. It has been sought after, mined and traded for thousands of years and, like oil, been at the centre of wars.

With a limited supply it is always likely to keep its value. Investors have used it as a hedge against inflation in the past, and now seemingly using gold to hedge against negative interest rates.

With a limited supply it is a store of value and, for such a pricey metal, it is surprisingly versatile, having been used as money, a store of value, jewellery and electronics (among others).

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Gold Market Drivers

Supply and Demand
All markets are subject to forces of supply and demand and gold is no different. Long-term investors monitor gold demand of countries and central banks, as they tend to buy in size. The World Gold Council releases a quarterly report breaking down levels of supply and demand for such groups, along with jewellery, ETFs, coins and technology demand.

USD
It is only natural to expect an inverted correlation between gold and USD, as spot gold is priced in dollar. Ideally traders would like to see a weaker USD to trade gold long (and visa-versa). That said, no correlation is fixed and there are occasions where both the USD and gold and move in tandem, as both markets are considered safe-haven assets.

Risk-Sentiment
There are several markets which attract money flows during times of risk-off. Gold is just one of them. If headlines rock markets enough to see equities fall, bonds rise and JPY and CHF attract inflows, the chances are gold will also appreciate. The reverse is also true; once risk-appetite returns, gold often weakens to some degree.

Economic Data
If macro-economic data suggests global growth is softening, gold could appreciate as investors become defensive. Whether it is a short lived reaction or the start of a new trend depends on the importance of the data. Ultimately this intertwines with risk sentiment; if a slew of macro data softens, it could trigger a risk-off reaction and support gold as a secondary reaction.

How Does Gold Trading Work?

When trading a gold CFD, you do not become an owner of the physical market or enter a contract to take a future delivery. Yet you still have the ability to trade live market prices, both long and short.

Leverage means that the cash requirements for entering a position are a fraction of what it would have cost to enter the underlying market, making gold trading more accessible to traders of all levels.

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Long example: Gold (XAUUSD)
A trader buys 5 contracts of gold (100 ounces per contract) at USD $1726

  • If the gold price rises to $1,759 the trader could exit for a profit around $16,500
    • (# contracts x contract size) x (exit price – entry)
    • (5 x 100) x ($1,759 – $1,726)
  • If prices fall to $1,709 the trader could exit for a loss around -$8,500
    • (# contracts x contract size) x (exit price – entry)
    • (5 x 100) x ($1,709 – $1,726)
  • A 1% margin requirement with 100:1 leverage requires $8,500 of capital
    • (# contracts x contract size x price) / leverage
    • (5 x 100 x $1,726) / 100

 

Short example: Silver (XAGUSD)
A trader sells 1 contracts of silver (5,000 ounces per contract) at $19.25

  • If prices fall to $17.00 the trader could exit for a profit around $11,250
    • (# contracts x contract size) x (entry – exit price)
    • (1 x 5,000) x ($19.25 – $17.00) 
  • If silver rises to $20.50 the trader could exit for a loss around -$6,250
    • (# contracts x contract size) x (exit price – entry)
    • (1 x 5,000) x ($20.50 – $19.25) 
  • A 1% margin requirement with 100:1 leverage requires $962.50 of capital
    • (# contracts x contract size x price) / leverage
    • (1 x 5,000 x $19.25) / 100

 

Costs associated with Gold Trading

Spread
The spread is a nominal transaction cost to enter a gold trade and is simply the difference between the bid-ask prices. The spread is variable and generally tighter during periods of higher trading activity such as the London and US session.

Commission (Pro Accounts Only)
On a pro account, a $7 commission is paid for each full contract (100 ounces) that is traded in total. This is the equivalent to $3.50 to enter and $3.50 to exit the same trade. As we offer partial contracts, 0.1 lots (10 ounces) costs just 70c and 0.01 lots (1 ounce) costs 7c. Standard accounts are commission free, so just the spread is paid.

Swap:
Each country sets its interest rates on its central banks interbank rate. A swap is a holding cost which is derived from the currencies relevant interbank rate. As gold is traded in USD, the Fed’s interbank rate is used.

Depending on the underlying rate, swaps can be positive (debit) or negative (credit) on open positions and are calculated daily at market close. As interest rates are calculated 365 days a year and spot market prices are generally settled 2 days later, Wednesday is a ‘triple swap’ day for gold to account when markets are closed over the weekend.

Advantages of Trading Gold CFDs

  • Trade long or short
  • Fast Execution
  • Trade on margin
  • Trade risk sentient
  • Hedge Physical Gold, an ETF or Gold Stocks
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Trade Long and Short
Being able to trade in both bullish and bearish markets is not always possible with underlying markets. Not all brokers will lend stock to short shares, and futures can prevent traders from entering or exiting the market. With CFDs you are free to speculate on the market’s direction.

Fast Execution
Trading physical gold or even ETFs come with delays. Bypass these bottlenecks with gold CFDs, as entry and exit are almost instant.

Trade Risk Sentiment:
As gold is considered a safe-haven asset, it can attract money flows during times of uncertainty. This makes gold CFDs an excellent vehicle of choice to trade risk sentiment as sentiment oscillates between bouts of risk-off and risk-on.

Hedge Physical Gold, an ETF or Gold Stocks
A investor can use CFDs to hedge out market risk for a relatively small cost compared with the underling market they hold. Hedging is the process of opening a trade in the opposite direction (usually of equal value) to their original position. Here are just a few examples:

  • If an investor holds physical gold, they are effectively long the gold market. But if they remain bullish on gold overall yet are concerned gold may correct over the near-term, they could opt to short gold CFDs of equivalent value to their physical gold holdings. In doing so, if prices fall then the profits on their short gold CFD offset the losses of their physical position. Of course, if gold prices rise and their physical gold appreciates in value, the investor loses money on the hedged gold CFD, so could then choose to close the hedge.
  • Taking the same principles as above, traders can hedge ETFs or even a portfolio of stock CFDs. Perhaps they are short a group of US gold miners but are concerned that prices may correct higher, they could open a long CFD to hedge out the market risk.

Why Trade Gold with FXTRADING.com?

  • Competitive spreads
  • Low Transaction Costs
  • Up 100:1 Leverage
  • Fully Hedge Your CFD Trade
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Competitive spreads
Trade tight spreads via top-tier liquidity providers at FXTRADING.com.

Low Transaction Costs
By offering tight spreads, competitive swap rates and low (or now) commission, we endeavour to keep your trading costs as low as possible.

Up 100:1 Leverage
With 100:1 leverage and partial contract trading, you can trade as little as one ounce of gold for a fraction of the cost of the physical market.

Fully Hedge Your CFD Trade
If you open a gold CFD of equal value in the opposite direction, your margin requirements will be zero for the two trades, freeing up capital for other opportunities whilst you hedge your gold CFD.

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