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Modern global markets enable anyone to trade commodities, making it easier than ever to trade gold and other metals without needing to physically own them. Gold trading via CFD’s involves opening a temporary order to buy or sell an exact amount of gold. The profit or loss is determined by the change in the price of the metal for the duration of the contract.
Introduction to the Gold Market
Trading gold in today’s online markets allows investors to profit from daily price movements or long term trends. Here we’ll impart everything you need to know to start trading gold. That 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.
Since prehistoric times gold was one of the first metals to be mined, mainly because of the form in which it was found, being nuggets or small pieces at the bottom of a river. It became so high in demand that Egyptians started mining it in 2000 BC. Throughout history many civilizations chose gold as a reliable and universal form of money for trading goods.
Gold has been mined since prehistoric times, with its form and beauty making it attractive to many ancient civilisations. From large gold nuggets through to small pieces of gold at the bottom of a river, this metal has always been precious. The demand for gold was so high that ancient Egyptians started mining the metal in 2000 BC. Throughout history, many civilisations have made the decision to use gold as a reliable and universal form of exchange for trading goods.
The gold standard describes a monetary system where the economic currency is backed up by the gold reserves of the issuing country. This standard came to exist after the recognition of gold as an actual currency. This standard was abandoned by the United Kingdom and the whole British Empire during World War I, with most other countries also abandoning it during the 20th century.
How to trade gold?
Different forms of gold available to traders and investors:
- Physical metal (bullions or coins)
A bullion is a grouping or bulk of precious metal. Measured in the form of a bar and weight.
- Gold certificates
These are very similar to the first paper bank notes. Commencing in the 17th century, gold certificates acted as proof of gold ownership and were passed on like cash payments. Today, they are still issued by certain banks and represent a quantity of gold bullion or coins.
- Gold futures
This represents a contract agreement for the delivery of gold at a set price in the future. Investors use gold futures to help manage price risk. Since gold futures contracts are traded at centralized exchanges, they offer more leverage and flexibility than trading commodities themselves.
- Gold-based ETFs
exchange traded funds, are managed by gold trading CFD experts. If gold continues to offer good returns, ETFs can potentially give traders a better chance to earn more than if they were to trade on their own. Keep in mind that the fluctuating price of gold will continue to affect the ETF.
Why Trade Gold with AvaTrade Australia?
First thing’s first: you can start trading with AvaTrade today for as little as and start trading gold and other precious metals. As a welcome bonus, we are offering up to $10,000, depending on your initial deposit. AvaTrade is a regulated and trusted broker on 5 continents, and is an Australian Securities and Investment Commission (ASIC) regulated firm. We have been trusted by our clients for the past 11 years and are here to help you today. You will get access to a range of trading educational tools, trading advantages and benefits that are exclusive to AvaTrade clients.
We offer a range of trading platforms for all types of traders and levels of experience, including automated trading solutions. With AvaTrade, you are guaranteed to find a trading environment that suits your style.
At AvaTrade you can trade gold online, easily and effortlessly. Try gold trading with Australia’s leading regulated broker and enjoy the following benefits:
- Trade gold with competitive spreads
- Make larger trades with leverage of up to – among the largest in Australia
- Choose MetaTrader 4 platforms
- Trade whichever way you think the market will go – long or short
- Trade anytime with our unique app AvaTradeGO
- Automated trading platforms for desktop, tablet & mobile trading
- Get 24/5 live client support in Australia, with multiple languages
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Gold Trading Online
Gold trading with AvaTrade is easy to understand, especially if you have some experience in the forex market. Gold units are measured in Troy Ounces against a currency – usually the dollar – in a similar way to a Forex currency pair.
Gold Trading Influences and Gold Trading Strategy
Several distinct factors come into play when analysing the movement of the Gold price:
- Supply and demand
Most of the global demand for gold comes from jewelry production and manufacturing (50%), along with investment purposes (40%). Increased demand with low supply can mean a higher price, with oversupply likely to weaken demand and drive prices lower.
- Market sentiment
Political uncertainty and/or instability contributes to global economic uncertainty and the price of gold.
- Market volatility
Gold has often been used as a safe haven investment when markets are unpredictable.
- Currency movements
The US dollar is a strong influencer. When the dollar falls, commodity prices around the world increase. The US dollar and gold have an inverse relationship.
Overall if you are looking to an alternative investment arena, or a hedge – which is a reduced risk of price movements in any asset, then gold might be the right asset for you.
Please note that trading in this market involves risk like any other.
Few tips for trading gold:
- Gold is often compared to the price of yen since both assets fall into the category of a “safe haven instrument”. Because gold and yen often move in the same direction, you can check your trade set ups by comparing the two.
- Focus on the behavior of gold price and always remember that commodities can move more than currencies.
- The most popular Gold exchange rate is the XAU to USD rate. XAU is the trading terminal’s code for gold.
Gold Trading Main FAQs
- Is it still worth it to trade gold?
Gold has been used as a medium of trade and a store of value for thousands of years, and trading gold in the 21st century is just as relevant as it’s always been. Gold remains a valuable store of value, with many investors using it as a hedge against financial crisis, inflation, and geopolitical risks. As one of the largest and most liquid markets in the world, the gold market offers traders huge opportunities. Prices can be volatile, but the market is rational, which makes trading gold an exciting and potentially profitable endeavor.
- Is gold the best precious metal to trade?
Gold is definitely the most popular metal for both investors and traders, but if you’re looking for a precious metal with a bit more “pop” then silver is also a very good choice. That said, gold is often easier to forecast since it is primarily used as a safe haven asset and a store of value. Unlike silver and the other precious metals gold does not have any large industrial use, so it has fewer factors impacting its movement. Plus the huge liquidity makes the market accessible.
- What is the best strategy for trading gold?
To trade gold successfully there are many strategies that can work. Of course if you can follow the professionals, the so called “smart money”, you’re likely to have a better chance of success. One method they use is to focus on the seasonality of gold. Historically gold makes it strongest moves in September. It is also strong in the first two months of the year. So these are the best months to look for a long setup. Conversely gold is weakest in March and October, making these good months to look for pullbacks in the market.
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