Trading gold in today’s online markets allows investors to profit from daily price movements or long term trends. Here we’ll explain everything you need to know to start trading gold and list the best brokers with gold instruments. Our tutorial includes trading on gold forex, futures and options, plus exploring what makes an effective strategy. We’ll wrap up with global gold trading hours and useful tips.
The best gold trading brokers offer reliable charting software. Trading gold on MetaTrader 4 (MT4) is particularly popular.
But regardless of the system you chose, your gold trading platform will need easy-to-follow price charts and signals. Any additional free tools so that data, symbols, and patterns are explained will also help.
Essentially, the best brokers help inform your predictions and market outlook. Keep an eye out for extra learning resources that offer details of alternative gold trading methods too.
There are also online services that will allow you to buy physical gold, and they will store it as well. This resolves one of the hardest issues of buying physical gold – where to keep it securely!
One such service is Bullion Vault. They allow you to buy physical gold which they store and secure. The service also reduces any liquidity risk, as gold (and other precious metals) can be bought and sold anytime.
Trading Gold: How It Works
Before you sign up for a trading account, it’s important to understand the basics. Gold trading at today’s markets provides investors with several options:
- Gold bullion – Gold bullion is physical gold, often in the form of bars or specialised coins. The value attributed to the precious metal depends on the type of bullion and unit weight. But while owning physical gold may be easier than procuring large quantities of oil, there are still transaction fees, storage costs, and insurance to consider.
- Gold certificates – Similar to cash banknotes and originating in the 17th century, gold certificates demonstrate ownership.
- Gold futures – Gold futures and micro futures contracts agree a fixed price for the commodity at a specific date in the future. Because gold futures are traded on exchange platforms, they promise more leverage than dealing in physical gold. Returns are dependent on the fluctuations in price between the time the contract is agreed and the expiry.
- Gold CFDs – Gold contracts for difference (CFDs) are short-term orders to buy or sell a fixed amount of gold. Gold CFDs have a set expiry. Returns made trading on gold CFDs will depend on price changes during the contract.
- Gold ETFs – Gold exchanged-traded funds (ETFs) are usually purchased from a broker or stock exchange. They allow you to buy a pool of securities, commodities for example, without having to purchase all the individual assets. Costs are low but the value of the ETF is tied to the price of gold.
- Gold swaps – Swaps are custom contracts traded over-the-counter (OTC). In contrast, futures and options contracts are found on central exchanges.
Trading Gold In Forex
Gold is effectively a currency in the forex market. It is nearly always traded against the US dollar with the code XAU/USD.
As a result, your strategy needs to track movements in the US dollar.
An increase in the price of the US dollar could push the value of gold down. So keep abreast of forex news websites for tips on upcoming trends and analysis.
Liquidity also plays an important role when trading gold on the forex market. Average daily trading volumes of gold exceed all currency pairs, excluding EUR/USD, GBP/USD, and USD/JPY.
Note gold trading hours on forex websites often run continuously around the clock.
History Of Trading Gold
Trading physical gold dates back to 2000 BC when ancient Egyptians began mining the precious metal. Now global supply of the commodity is over 170,000 tonnes, with production tripling year-on-year since the 1970s.
So reliable is its value that countries have used it as currency reserves for centuries.
Trading The Gold Silver Ratio
Day trading in gold and silver might be popular, but what is the gold silver ratio and how does it work? It’s simply the amount of silver needed to purchase one ounce of gold.
For example, if the price per ounce of gold is $1,000 while an ounce of silver costs $50, the gold silver ratio would be 20:1.
If you can predict which direction the gold for silver ratio is going, you can generate returns regardless of whether the market trends up or down. However, it’s worth noting that while silver is cheaper than gold, it is more volatile.
Note the trading of gold and silver can also be used to diversify the precious metal held in a portfolio.
Trading Gold Strategy
There are many different techniques and mechanisms you can employ in your gold trading strategies. All will require daily technical analysis on price and volume charts. You’ll also need to understand what influences the price of gold:
- Supply and demand – Volume per day data shows half of global demand is driven by jewellery production. Another 40% represents investment accounts. Take a look at price charts and you’ll see that when demand is up and supply is down, price rises. In contrast, if supply increases and demand drops, live price rates will fall.
- Market volatility – Real-time trading signals on your charting software will respond to market moves. When stocks aren’t performing, people move to gold. In contrast, when stock market forecasts are strong, gold trading levels fall.
- Geopolitics – A quick look at gold’s price history and you’ll see predictions today are guided by geopolitical forces. Uncertainty in the financial markets will cause businesses to hurry to gold, pushing prices up. So get familiar with a map of the world and brush up on basic economics to ensure you’re well prepared.
Strategy In Action
Methods vary, but a relatively straightforward strategy that may deliver a decent margin takes into account the geopolitical environment.
If the global outlook looks like it may intensify, you could purchase gold while selling the Australian dollar against the US dollar. You may also want to ask yourself what are the big production names doing.
If a company like Newmont Mining’s output levels are climbing, supply is going to increase and the price of gold may fall.
Gold Trading Market Hours
Key trading times around the world may vary, but the popular commodity is almost always available. Below we’ve detailed the crucial opening times and trading hours of some of the main gold exchanges.
- Online trading hours in London, UK – Opens 08:00 – 17:00 (GMT)
- Online trading hours in New York, USA – Opens 13:20 – 18:30 (GMT)
- Online trading hours in Mumbai, India – Opens 04:30 – 18:00 (GMT)
- Online trading hours in Dubai, UAE – Opens 04:30 – 07:30 (GMT)
- Online trading hours in Jakarta, Indonesia – Opens 02:30 – 10:30 (GMT)
- Online trading hours in Islamabad, Pakistan – Opens 05:00 – 13:00 (GMT)
Note gold trading times may vary over weekends and holidays. And while not listed above, online gold trading hours in Australia, New Zealand, South Africa, Thailand, Canada, The Philippines, and Europe run almost 24 hours a day.
Gold Trading For Beginners
For dummies, gold trading 101 is to first focus on trading gold only. Next, consider market sentiment. If the market view today is looking up, the price of gold is probably going to come down.
Alternatively, if the market outlook is bleak, expect a rise in price. Start with this straightforward gold trading strategy.
As your confidence and returns from trading using gold grow, consider the demand for jewellery for cash.
Keep a particular eye on live demand in China and India, where gold jewellery is used as a long-term investment vehicle. This could indicate future price trends.
Advantages & Disadvantages
- Benefits of trading gold include its hedging ability against inflation. In contrast to most traditional currencies, gold retains its purchasing power during inflation.
- Gold also stands its ground during periods of global instability, even as the price of other assets fall.
- Finally, there is a range of financial instruments available to trade with gold, from e-micro futures to stocks and gold bonds.
- Gold is highly volatile. Now while this means the market has the potential to generate significant returns, it also means there’s a serious risk of losing money.
- The rate and price of gold during today’s trend is not reflective of where it may be in a few days or next week. There is the cost of trading gold too.
- Gold ETFs, for example, are likely to come with broker fees.
- Lastly, trading on gold comes with sizeable liquidation spreads.
Laws and regulations around trading gold vary across the world. Brokers and platforms are usually subject to regulation and may require a license to sell gold financial instruments. In the UK, for example, gold futures, options, and CFDs fall under the scope of the Financial Conduct Authority (FCA). In the EU, the Markets in Financial Instruments Directive (MiFID) regulates commodity derivatives.
Broker-dealers will also normally need a license in Dubai, Singapore, Zimbabwe, Malaysia, India, South Africa, and Hong Kong, to name just a few. Ensuring intermediaries are licensed offers the short-term trader a degree of security and protection.
Tips And Tricks
To give yourself the best chance at decent returns, consider:
- Central bank actions – Keep an eye on the buying and selling activity of central banks.
- Latest market news updates – Today’s news tips are a great source of possible trends and helpful quotes.
- Blogs & newsletters – Regular blogs, discussion forums, and newsletters are a great way to get advice and ideas from market experts.
- Open a demo account – Many web apps offer demo accounts, meaning you can practice a trading with moving averages strategy for example, before investing your own money.
- Academy courses and PDFs – Online boot camps, virtual workshops, plus gold trading books and forex PDFs can be a great way to get tutorials and hear the secrets of trading gold from experienced investors.
- Gold trading robots – Some user reviews point to automated trading robots as an effective way to put a proven gold trading strategy on auto-pilot.
- Check out TradingView – Home to price graphs, charts and reports for trading gold on the spot and futures markets, TradingView is full of useful ideas. Regardless of whether what you need is for beginners around pips and lot size, or a strategy for swing ETFs, TradingView is worth a look.
Is Gold Trading Halal In Islam?
Whether trading in gold is halal or haram is open to interpretation. Some believe it’s similar to currency trading in that the broker buys and sells the gold for you.
However, others believe Shariah terms of possession are not satisfied in the transfer of risk, and therefore gold trading is haram. So before you choose a broker and start trading in gold, consider the halal parameters and make sure you’re comfortable.
For further guidance on whether day trading is halal, see here.
There is no definitive profit calculator for trading gold. Results vary depending on your strategy and overall business plan. And while trading for a living could make you a millionaire, many will lose money. So make sure you understand your own limits and do your homework before you open an account.