Risk Warning: Your Capital is at Risk.
Gold is one of the most traded commodities in the world. But it is also one of the most challenging because of its use in various industries and as a store of wealth.
This guide will help you understand how and where to get started buying or trading gold.
In a hurry? If you want to get started trading gold, here are brokers available in to consider:
Disclaimer: Availability subject to regulations.
Between 74-89% of retail investor accounts lose money when trading CFDs.
At the end of this gold trading guide, you’ll find a list of relevant resources, like other popular precious metals to trade. Read on to find out about gold trading and handy gold trading strategies.
Ways To Trade Gold
There are so many options for speculating on the price of gold including stocks, ETFs, futures, options, derivatives like CFDs, or physical trading with products like bullion. Here is a quick overview of each, and how to get started.
How To Buy And Trade Gold Bullion
One way to speculate on the price of gold is to hold physical gold bullion such as bars or coins. Bullion traders may choose to securely store their gold at home in a safe, or trade additional funds to hire an external high-security storage facility.
Here are popular online gold bullion dealers in you might consider:
How to Trade Gold Stocks
Purchasing stocks in exploration and mining companies may allow traders to make a leveraged bet on the price of gold. In theory, many of the costs of running a mining company are fixed.
Therefore, as the price of gold increases, the additional revenues should flow to the bottom line in the form of profits.
Markets assign a multiple to these profits, so in bull markets, traders should make more money from owning shares.
Gold Explorer and Mining Stocks
Here are a few leading gold explorer and mining stocks:
|Barrick Gold||Largest gold mining company in the World, headquartered in Toronto.||Toronto (TSX)|
New York (NYSE)
|1983||Originally founded as an oil and gas company.|
|Newmont Mining||US gold mining company based in Colorado.||New York (NYSE)||1916||Newmont is the only gold company in the Standard & Poor's 500 Index|
|Polyus Gold||Russian gold mining company headquartered in Moscow.||London (LSE)|
|2006||The largest gold miner in Russia.|
|AngloGold Ashanti||Johannesburg based global miner and explorer.||Johannesburg (JSE)|
New York (NYSE)
|2004||The company has 17 mines in 9 countries.|
|Newcrest Mining||Australia's leading gold mining company.||Sydney (ASX)||1966||Originally a subsidiary of the Newmont Mining Company.|
To get started you can read our introduction to online stock brokers.
How To Trade Gold ETFs
ETFs are financial instruments that trade like stocks. They are baskets of company shares traded during the day on stock exchanges.
Biggest Gold ETFs
Here are the live prices for the five biggest gold ETFs ranked by total assets under management as of 2020.
|SPDR Gold Trust||iShares Gold Trust||SPDR Gold MiniShares Trust||ETFS Physical Swiss Gold Shares||GraniteShares Gold Trust|
Here is a fifty-year historical price chart of gold prices, to put the above ETF tickers into perspective.
How To Trade Gold CFDs
Contracts for difference (CFD) allow traders to speculate on gold prices without actually owning physical gold, mining shares, or financial instruments such as ETFs, futures, or options.
The value of a CFD is the difference between the price of a gold instrument at the time of purchase and the current price. Learn more about how CFDs work and where you can trade them in our CFD Trading Guide.
The price difference can be based on the likes of gold’s spot price, gold ETFs, gold futures, and gold mining shares.
How Do CFD Traders Get Started?
CFD traders open an account with a broker and deposit funds. The funds serve as a margin against the change in the value of the CFD.
Trading gold CFDs doesn’t include storage costs, since there is no physical trading involved.
However, CFDs are still high-risk financial instruments, and your capital is at risk so you should be an experienced trader or seek out a broker that offers a demo account to allow you to develop your knowledge in advance of risking real money.
How To Trade Gold Futures
These gold trading derivative instruments allow traders to speculate on the future gold price movements through the purchase of exchange-traded contracts.
Futures contracts come with a fixed or variable margin and leverage. When purchasing a futures contract, the trader has the choice to accept the agreed-upon delivery date or perform what’s called a ‘rollover’.
A rollover means that the contract is extended for a later delivery date.
Gold futures trade on the COMEX, which is part of the Chicago Mercantile Exchange. The following is a summary of the contract specifications for Gold Futures (symbol GC), along with E-Mini Gold, and Micro Gold.
|Gold||E-Mini Gold Futures||Micro Gold Futures|
|Contract Unit||100 troy ounces||50 troy ounces||10 troy ounces|
|Price Quote||U.S. Dollars and Cents per troy ounce||U.S. Dollars and Cents per troy ounce||U.S. Dollars and Cents per troy ounce|
|Min. Price Fluctuation||$0.10 per troy ounce||$0.25 per troy ounce||$0.10 per troy ounce|
|Listed Contracts||Trading is conducted for delivery during the current calendar month; the next two calendar months; any February, April, August, and October falling within 23 months; and any June and December falling within 72 months beginning with the current month.||Trading is conducted for delivery in any February, April, June, August, October, and December falling within a 24-month period for which a 100 Troy Ounce Gold Futures contract is listed.||Monthly contracts listed for any Feb, Apr, Jun, Aug, Oct, and Dec in the nearest 24 months.|
|Settlement Method||Deliverable||Financially Settled||Deliverable|
How To Trade Gold Options
Options contracts are also a leveraged way of trading gold. The trader purchasing the contract can buy an options contract to sell or to buy gold at a future date.
The term ‘options’ is short for the “option to execute.” The trader pays what’s called an option’s premium, a fee, which buys the freedom to withdraw from the purchase before the execution date. Learn more about options in this Options Trading Guide.
Options traders may find that they were right about the direction of the gold market but still lost money on their trade.
Many options traders use options strategies to hedge or cover other trades. See our options strategy guide to see what these terms mean.
How To Trade Gold Via Forex
If you already trade on the foreign exchange (forex), an easy way to get into gold trading is with metal currency pairs.
It is roughly the same as with regular currency pairs like GBP/USD (Pound sterling/US dollar).
But instead of two currencies, there is a metal and its spot price in a particular currency. The most common are gold (XAU/USD) and silver (XAG/USD).
A commodity’s spot price is the price at which the commodity is sold for immediate delivery.
Gold Brokers: Where To Start Trading
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. <b>Between 74%-89% of retail investor accounts lose money when trading CFDs.</b> You should consider whether you can afford to take the high risk of losing your money.
Useful Gold Trading Strategies
There are countless gold trading strategies used to determine when to buy and sell gold. As we’ve discussed, gold trading is a complex venture and must be studied carefully.
However, below we outlined two of the more popular strategies using the gold/silver spread and gold-stock pairs.
You can use this live gold price chart to practice with.
The Gold/Silver Spread
One popular trading strategy employed by some longer-term traders is the gold/silver spread.
Historically, these two metals have both been viewed as stores of value with commercial uses.
Some gold and silver traders choose to track this ratio and develop pairs trading strategies based on which asset is cheaper relative to the other. When the ratio is high, it may indicate that gold is overvalued or that silver is undervalued.
However, there is no guarantee that historical correlations will remain the same in the future.
Learn more about bullion trading and what other precious metals you can purchase physically. These include silver, palladium, and platinum.
Gold Stocks Pairs Trade with Gold
Another popular strategy is to trade gold as stock pairs trade against it.
Some traders track the historical relationship between the price of gold and the price of gold stock indices such as the Philadelphia Gold and Silver Sector Index (XAU) or the AMEX Gold BUGS (Basket of Unhedged Gold Stocks) Index (HUI).
The idea is that gold stocks – particularly those companies that don’t hedge their exposure to the metal – are a leveraged way to purchase gold and that the two asset classes may be positively correlated.
Gold Trading Tips: The Basics
Before trading gold, traders should consider the following factors to create a personal trading strategy:
- Purchase size: Consider how much exposure you want to have. Many traders get carried away and take outsized positions in the metal.
- Physical gold: Some traders avoid physical gold because it’s easy to gain exposure through stocks or ETFs. However, physical gold is often used as a storage of value in times of inflation — by no means does this mean it’s a safe one.
- The US dollar: The movement of currency markets may have a significant impact on gold prices, especially the world reserve currency, the US dollar.
- Take a long-term view: Gold is a volatile asset and can be subject to some wild price swings. At the same time, the metal has a long trading history. Traders may want to pay attention to key long-term support and resistance levels for clues about where the metal is heading next.
Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.
Below we answer some common questions about gold and gold trading.
What was the highest price of gold?
In terms of fiat currency price, the highest price of gold in modern times was $1,895 in September 2011. However, the price of gold has varied widely for hundreds of years. If we look only since the 1970s, gold reached its highest level in inflation-adjusted dollars in 1980. Before the introduction of fiat currencies, historical gold prices were higher.
What is the disadvantage of gold?
Like all commodities, gold has some disadvantages. Some forms of it can be costly to trade or store in case of trading gold physically, like bullion bars and coins. But the biggest disadvantage of gold for some traders is that its price is historically volatile.
Is trading gold profitable?
Looking at gold prices since 1970, there were close to as many opportunities to lose money as to gain it despite the fact that the current price is much higher. Successful gold trading requires expertise, but expertise alone doesn’t ensure success. And some aspects of trading gold are simply out of the trader’s hands.
What time does gold stop trading?
Unlike other daytime markets, gold trading is open to traders 24-hours-a-day. That said, some derivatives markets like futures have set trading times that are defined by the exchange they’re traded on. For example, CME’s COMEX Gold futures trade from Sunday to Friday between 5:00 pm and 4:00 pm (CT). That said, brokers like IG.com have a 24-hour Gold Futures market.
Are gold coins worth more than gold bullion?
Yes, gold coins are worth slightly more than gold bullion. This is due to the additional minting costs to create gold coins. That said, traders hold both gold coins and bullion as the production costs call for a distinction in quality and value between the two assets. Gold coins are also more likely to have artistic and sentimental value in the long term.
Can I trade gold in USA?
Traders based in the USA can trade gold physically, as well as in the form of selected derivatives. One derivative market that isn’t available in the USA is contracts-for-difference, since the passing of the Dodd-Frank Act in 2011. USA traders can continue to trade gold futures, stocks, and options to cover their speculative endeavors.
Is gold a safe haven for traders?
Traders have referred to gold as a financial safe haven in the past, although this is not the case. Gold has been used as an store of value in times of inflation, although gold prices have a volatility trend of their own — this means that gold is by no means safe. Gold prices may not move in direct correlation with the rest of the world’s commodity prices, so rather than a safe have, gold may simply be considered as an alternative store of value.
What does “spread” mean?
The spread is the difference between the buy and sell price of a financial instrument like gold CFDs. A lower or “tighter” spread is better for the trader, a higher or “wider” spread generally means the broker is making more on the trade. Spreads can be fixed or variable.
Why do central banks hold gold?
Central banks have gold reserves for several reasons. Gold is one of the most widely-used stores of value worldwide aside from FIAT currencies. Central banks use the metal as a store of value, as well as a guarantee to pay depositors, and as leverage to support national currencies. Many central banks also give out gold loans with variable annual interest rates.
What role does gold play in financial markets?
Unlike other metals with many industrial use cases, gold prices are primarily driven by the belief of it as a store of value. Gold partakes in financial markets as a key metal in mining company shares, through trading instruments like derivatives, and a manufacturing component in a handful of commercial and retail markets.
Is gold a high liquidity asset?
Yes, gold is a high liquidity asset along with other popular precious metals like silver, platinum, and palladium. Gold is considered to be one of the most tolerant physical assets to inflation with a controlled market. Gold market prices are typically quoted in ‘spot prices’ with a monetary value pinned to grams or ounces.
Is gold good for short-term or day trading?
Gold prices change relatively steadily over time — the metal does not experience wild up and downswings. While gold is often considered a lower-risk speculative asset, diligent foresight and precise timing can make gold a profitable asset to trade short-term. However, day-traders tend to avoid gold because of its low volatility.
What is the best way to trade gold?
No one method is best for every person, here is a comparison weighing the pros and cons on various ways to invest and trade in gold:
|Trading Method||Ownership||Management Costs||Security Costs||Expiry Date||Mgmt Cost||Leverage|