Valuable since antiquity, gold has long been one of the most popular investments for storing wealth. Gold's beauty, malleability, and durability have meant that it's one of the most treasured commodities of all time.
If you want to start gold commodity trading, you've come to the right place. Open an account on the cutting-edge Tradu platform and take a position to get started.
Gold trading involves speculating on the price of gold markets to make a profit. But instead of handling the gold bars themselves, when you trade gold commodities, you make money by using futures, options, spot prices, and shares of other ETFs. Please note you cannot trade shares of other ETFs, futures or options with Tradu; their inclusion here is for informational purposes only.
Although trading central gold has always been popular, the gold market has grown exponentially in the last few years. So much so, that the gold trading market is predicted to reach USD 403.8 billion by 2028 from USD 275.40 billion in 2021.
But why is gold trading so popular? Well, it’s all down to its versatility. Just some of the reasons why gold is so popular include:
Although with traditional gold trading, you'd adopt the 'buy low, sell high' mantra, when you trade in gold with us, you can benefit from both rising and plunging gold prices.
Trading gold CFDs is essentially predicting which way the market will move. By choosing to go long or short on gold prices, you can profit – as long as the market moves in your favour.
The principle is simple: the further the gold market moves in the direction you've predicted, the higher the profit you'll make. The same goes for losses.
When you trade gold, you're not handling the raw product yourself. Instead, you're speculating on the market price.
As such, there are lots of different ways you can trade gold. We've listed the main ways below. Please note you cannot trade futures or options with Tradu; their inclusion here is for informational purposes only.
One of the most popular ways to trade gold is by using futures. A futures contract is simply an agreement where you choose to buy or sell gold for a certain price – on a predetermined day.
Although you can use futures to take possession of the gold itself, you don't have to. Instead, you can use futures if you wish to settle your gold trades in cash.
How much you can make – or lose – depends on the price difference between buying and selling. Gold futures move in $10 increments. So, you'll make or lose $10 for every point of movement gold prices move in – or out – of favour.
For example, if the market moves 100 points in your direction, you'll make $1,000. On the other hand, if the market moves 100 points in the other direction, you'll lose the same amount.
Gold contracts are normally traded on the US Futures Market, OTC London Market or the Shanghai Gold Exchange.
Options give you the right to purchase or sell an asset at a specified price before a certain expiry date (otherwise known as a strike price). But you're not obligated to do so.
Gold options work similarly to futures, except you don't need to take delivery of the gold when the option expires. But, gold futures do have an expiry date, which must be taken into consideration.
There are two ways you can use options:
Contracts for difference (CFDs) allow you to speculate on whether the price of gold will rise or fall. If you believe the price of gold will rise, this is called 'going long'. Conversely, if you believe the price of gold will fall, this is called 'going short'.
Unlike options and futures, gold CFD trading allows you to trade gold at that exact moment in time. Spot commodity markets don't expire like options or futures do, so you can seamlessly trade in gold markets without ever going beyond your expiry date.
However, with CFDs, you need to pay an overnight fee if you want to keep your trade open beyond the market close.
Most commodities (including gold) can be traded 24/7. However, gold trade markets normally close at the weekend and some put in place trading breaks.
Gold trading times differ depending on whether you're using spot prices or futures:
Normally, gold is more volatile when the London sessions open at 8am (GMT) and when Wall Street opens at 1:30pm (GMT). The reason is simple: when the sessions open, there's a rush of orders.
If you're wondering whether you can day trade gold, the answer is yes!
Although gold moves in long-term trends, those that day-trade can take advantage of the market.
Much like any other exchange-traded market, gold trading prices are influenced by supply and demand. So, if the demand for gold doesn't rise at the same level as supply, gold prices will drop. And if the demand for gold outweighs the supply, gold will be worth much more.
Broadly speaking, supply and demand are impacted by the following factors:
Gold is seen as a reliable asset. So, in times of instability, many people choose trading in gold as a safety net among rising inflation.
With inflation rates in many countries rising at record levels in recent years, many traders are choosing to invest in gold rather than higher-risk assets such as crypto.
This increase in demand has led to an increase in gold prices.
Like many commodities, gold prices are influenced by the US dollar. For example, if the US dollar falls in value, many traders choose to invest in gold and vice versa.
As well as the demand for gold jewellery, the price of gold rises when gold is required for technology and industry.
For example, when economic uncertainties cause the number of people looking for premium jewellery to fall, the industrial uses of gold (e.g., electronic components using gold as a conductor) will keep gold prices stable.
This means gold isn't subject to extreme fluctuations in price, making it a somewhat less risky endeavour.
We all know that gold is finite. So, there will come a point when gold mining will cease.
However, until then, every time a new gold mining opportunity is discovered, this reduces the price of gold, as the supply increases in the short-term.
If you're wondering whether you can make money trading gold, the answer is yes.
Unlike more volatile markets, trading in gold is an excellent way to diversify your portfolio. This is because gold tends to be less affected by external factors. So, although gold is still affected by supply and demand, it's seen as a good way to hedge your bets against external factors such as inflation.
However, it's important to understand that although gold markets aren't typically as volatile as other asset groups, gold trading still involves an element of risk. So, it's paramount that you research the market, devise a strategy and stick to it.
Gold and silver often come hand-in-hand since these precious metals share similar physical features. For example, they're popular jewellery metals and are both used in a wide range of industries. This versatility means they're both used to hedge against market volatility and inflation.
But there are a few key differences – silver is generally cheaper and more unpredictable than gold.
To learn more about silver trading and how it differs from gold, read our complete silver trading guide.
If you're looking for a less volatile commodity to trade, consider trading in gold. Sign up with us and start trading central gold in a matter of minutes.
Not sure gold is the right commodity trade for you? Look at our other helpful commodity guides.
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