Gold trading

Trading In Gold: How It Works

  • July 15 2021
  • posted by : John Clark

Gold has always been a healthy way of investing your money and getting returns. It is one of the precious metals in the whole world and demand for it is increasing day by day. People used to invest in gold in the form of jewellery, gold bars, and various other ways. Digital investments are getting popular day by day and gold trading is a good form of investing your money. Online traders can take advantage of the daily price movement of gold. There are many short terms and long term opportunities for gold trading.

There are specific gold trading hours in the international markets. Therefore, you can also start trading gold as it is a healthy investment.

Types of Gold Trading

The first thing traders need to know is what are the trading options for trading gold. There are several options available for a trader that are as follows:

Gold Bullion

Physical gold or gold bullion are used for the same form of gold trading. These are especially in the form of bars and coins. Its value is calculated on the basis of weight. The current rate per unit weight is used to determine the whole value.

It is a good way to invest in gold as the returns are consistent but depend on the market performance. However, physical gold also incurs storage costs, transaction fees and other similar expenses.

Gold Certificates

Gold certificates are documents similar to cash banknotes that are issued to demonstrate ownership of gold. These are issued to people and they demonstrate the value of gold as on the purchase date. Their value also increases as the value of physical gold increases.

Trade Gold Futures

Futures contract or gold futures are agreements at a fixed price to be executed on a predetermined future date. They provide more leverage than dealing in the physical gold. Gold futures are traded on specific platforms.

The returns are the difference between the opening and closing price of the commodity. There is an expiry date of the contract and it has to be executed on the date.

Gold CFDs

Contracts for difference (CFDs) are complex instruments and come with a high risk of losing your money. Traders can trade gold with gold CFDs, they are known for short term investment. The quantity of gold and the selling date is predetermined. On the other hand, the returns are calculated on the basis of opening and closing prices.

Traders do not need to own gold for trading CFDs. Only the net difference between the opening and the closing price is treated as profit or loss.

Gold ETFs

Exchange-traded funds (ETFs) are similar to mutual funds. They need to be purchased from a broker or stock exchange without having the physical asset. The value of ETFs are always associated with the price of gold.

If the price of gold goes up the value of the ETF will also go up and vice versa. In this way, investors can trade in gold ETFs.

Gold Swaps

Swaps are also known as derivative contracts that are traded over the counter. Gold swaps can be traded in the gold market such as futures and options. They are also known as one of the best ways for making an investment in gold.

Gold Trading Strategies

A trader can make trading strategies at his convenience after studying the market and analysing all the factors. You have to understand all the factors that affect the price of gold.  The gold market is huge because of its demand all over the world and its short supply.

This metal is extremely precious and liquid in nature. Therefore, traders can earn higher returns with gold trading.

Technical Analysis for Price of Gold

The factors traders need to keep in mind during technical analysis are discussed below. Studying these technical factors can enhance the return on investment of an investor. The factors are as follows:

Supply and Demand

One of the major roles behind the price of gold is supply and demand. When you study this factor, you will notice that most of the time the demand is high and supply is low. It is a global factor and one of the main reasons for the continuously increasing price of gold.

Therefore, traders must study this factor and predict the future demand for gold for better returns on their investments. This is because if the demand will fall the price of gold will also fall and so will your investment value.

Market Volatility

The volatility of the market is another factor that can affect the price of gold. Traders can study gold stocks and the price of other precious metals to predict the price of gold. The price of gold moves according to the trend of the market, so figure out the trend.

Include this in your trading strategy, it can help you avoid the risk and you do not need to take the high risk on your investment. Hence, if you are trading in gold, study the best and determine what can be the future price movements.

Geopolitical Factor

Have a look at the current gold price and the historic price movement of the same. Analyse all the geopolitical forces and make the best analysis. Also, study the condition of the economy, so that can predict what can be the future price movement of the gold prices.

Tips for Trading Gold

To assist traders to get a higher return on their investments here are some tips about trading gold and figuring out future gold prices. The tips are discussed below:

  • Traders need to keep an eye on the actions of central banks, whether they are buying or selling gold in the gold markets.
  • The latest news can be great tips for trading gold, so keep an eye on the latest news updates about gold prices.
  • Blogs written by market experts are also good for the future price prediction of gold stocks or gold price.
  • If you are a beginner, then it is better to practice with a demo account and gain proper experience in the market. Avoid the high risk of losing your money while trading gold.
  • Study the long term support and resistance level of the gold prices and then make an investment in the same.
  • Try to figure out the perfect purchase size so that you can earn a return on your investment and do not lose your money.

Market Hours for Gold Trading

The trading hours for gold are different across the world. The online trading timing is as follows:

  • Trading hours for London, UK – Opens 08:00 – 17:00 (GMT)
  • Trading hours for New York, USA – Opens 13:20 – 18:30 (GMT)
  • Trading hours for Mumbai, India – Opens 04:30 – 18:00 (GMT)
  • Trading hours for Dubai, UAE – Opens 04:30 – 07:30 (GMT)
  • Trading hours for Jakarta, Indonesia – Opens 02:30 – 10:30 (GMT)
  • Trading hours for Islamabad, Pakistan – Opens 05:00 – 13:00 (GMT)

These are the hours during which you can trade in gold. However, there are many places in the world where you can trade gold 24 hours a day. The places are New Zealand, Australia, South Africa, Canada, Thailand, The Philippines, and Europe.

Advantages of Trading Gold

  • Traders can hedge it during the time of inflation and it can generate higher returns for your investments.
  • High range of investments in gold trading such as stocks, gold bonds, futures, ETFs, CFDs, and various others.
  • It is highly liquid in nature because the demand for gold never comes down, traders can take advantage of this situation.

Disadvantages of Trading Gold

  • It is one of the highly volatile commodities that come with a high risk of losing your money rapidly due to change in gold prices.
  • It is difficult to reflect the future price of gold after a few weeks or days, this is also because of the volatile nature.
  • A trader cannot be sure about whether he will make enough returns with his investment in gold or not.

Gold Trading Online Brokers

If you are looking for an online broker for gold trading. Choose the best broker and trading instrument to earn higher returns from the market. The various types of gold trading instruments are gold futures and options, CFDs, ETFs, and others.

There are many options for traders to choose from. You need to compare a wide range of brokers to find the best one according to your requirements. Here are a few of the leading brokers that are:

ABInvesting

  • ABInvesting is authorised and regulated by the Mauritius Financial Services Commission Authority (FSC).
  • More than 350 trading instruments are available for trading in the financial markets.
  • Traders can trade on the WebTrader and a Mobile App powered by the MetaTrader 4.
  • A commission-free broker but charges swaps and spreads charges of the trades.
  • Traders can start their trading account with a minimum deposit of $250.
  • You get a free demo account to start trading in the beginning.
  • There are three different types of live trading account as per your requirements.
  • Various types of deposit and withdrawal options are provided to a trader.
  • The maximum trading leverage available is 1:500.
  • Traders get a wide range of educational material and analytical tools.

Brokereo

  • Brokereo is authorised and regulated by the Cyprus Securities and Exchange Commission (CySEC).
  • Traders get more than 300 trading instruments to trade with.
  • Trade on a user-friendly trading platform that is MetaTrader 4, WebTrader, and Mobile App.
  • It is a zero commission broker but swaps and spread charges are payable.
  • Begin your trading account with a minimum deposit of $250.
  • Request for a free demo account in the beginning to practice.
  • Choose from three different types of live accounts for trading in the market.
  • Several options for making a deposit and withdrawing your money are available.
  • The highest leverage offered by the broker is 1:500.
  • Enhance your knowledge and skills with educational material and analytical tools.

HFTrading

  • HFTrading is Regulated by the New Zealand Financial Markets Authority (FMA) and the Australian Securities and Investments Commission (ASIC).
  • More than 350 trading instruments are available for trading in the international markets.
  • It is offering WebTrader and a Mobile App powered by the MetaTrader 4 trading platform.
  • Traders can trade commission-free by paying only the swap and spreads charges.
  • $250 is the minimum requirement to start your trading account.
  • Start with a demo account for free in the beginning.
  • Select from three different types of live trading account.
  • Make a deposit and withdrawal by the various different types of options available.
  • 1:500 is the maximum amount of leverage offered by the broker.
  • A wide variety of analytical tools and educational material are available with the broker.

The Bottom Line

Trading gold is a healthy form of investment and getting a higher return on it. Traders need an effective trading strategy and basic fundamental knowledge about the market. It is one of the leading financial instruments for online trading. Choose the right broker and way of trading so that you can earn good returns from the gold markets.

FAQs

Why do Retail Investor Accounts Lose Money When Trading CFDs?

The retail investor accounts lose money when trading CFDs. This is because CFDs are complex instruments and come with a high risk of losing money rapidly to leverage. It is one of the ways to trade gold and extremely risky. Gold is very volatile and the value of gold can move up and down real quick. Traders need to study the gold market in-depth and then make a trading decision.

How Do I Make Money with This Precious Metal?

Gold is a type of financial instrument for trading in the global financial markets. This does not guarantee any type of returns and traders need to understand it before investing their money in the market. There are different types of trades for buying and selling gold online and generating a return.

Start trading in gold with an effective trading strategy and understand how it works. You can generate higher returns if you take proper action for gold trading.

Is Gold Trading Suitable for Beginners?

Beginners can make money and increase their wealth by trading gold. But before they start trading in gold, study a few factors and the current market condition. It can help you figure out what can be the future price movements of gold. Invest in the market when the value of gold is down and take returns when it goes up.

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