A guide to gold trading

Gold is one of the most widely traded raw materials around the world, along with crude oil trading, and certainly the most popular of the precious metals, for both its financial and cultural value.

Gold belongs to the commodities market, along with other precious metals including silver and platinum, all of which you are able to trade with a CMC Markets account. Investing in gold in the UK is one of the most popular forms of trading and traders have put this into practice for over one thousand years. The yellow metal comes in many forms, where you can trade gold through gold bullions, gold coins and gold stocks in the share market.

a selection of gold bullions, coins and bars

The value of gold

The price of gold can fluctuate depending on political, social and economic instability. Trading gold is sometimes referred to as a ‘safe haven’ by traders because its price is not always affected by governmental decisions or inflated by interest rates, in a dissimilar way to some shares in the stock market. On the contrary, gold can act as a form of insurance as investors might reallocate assets into the gold market at unstable times. This could increase the value of gold, since its demand might rise as traders attempt to use it as a stock hedge.

So, why do some traders invest in gold? The answer to this question relates to gold hedging. Gold and other precious metals sometimes have a negative correlation with stocks and bonds, depending on the current stability of the economy. This reinforces the idea of precious metals as a safe haven for traders. When investors realise that their share positions are declining in value, some decide to take a chance on gold trading to balance out their potential losses. This is known as hedging in the gold market and it is a popular strategy amongst traders. This way, they are attempting to diversify their portfolio as they spread their bets across a range of markets, where the price of gold may increase in response to events that would typically cause the price of stocks and bonds to decrease.

Why not start trading gold with our demo account? Practising with virtual funds can help you to build a strong trading strategy before jumping deep into the gold market.

Gold trading online: how can it be done?

As a gold trader, there are several options for how to trade your asset. An easy option would be to buy and sell gold at its spot price. The spot price of gold reflects the exact current price that a buyer can purchase or sell the instrument for an immediate delivery. Alternatively, it is possible to trade gold through a forward contract, which is an agreement between two parties to buy and sell an asset at a fixed price at a future date. Read more about forward trading here.

Popular methods for trading gold include spread betting and CFDs, which CMC Markets offer across a range of markets, including commodity trading. View our instruments page for Gold – Cash to view our competitive spreads, buy and sell prices and margin rates, as well as common trading hours that we offer for gold trading.

Gold spread betting

Spread betting is one of our most popular products for trading on gold. It allows you to trade tax-free* while taking advantage of the gold market’s price movements without owning the physical asset. Spread betting enables you to open a position to invest in gold based on whether you believe the price of gold will rise or fall. Depending if the market moves in your favour or not, profits or losses will occur.

Gold CFDs

CFDs (contract for differences) are leveraged products that only require a trader to deposit a small percentage of the overall trade value, which is referred to as margin requirement. Unlike buying outright at the gold spot price, you do not own the underlying asset (similar to spread betting) but agree to exchange the difference in value from the time difference between opening and closing the position. Please note that where there is opportunity for profit from trading gold, there is equal opportunity for losses.

Gold ETFs

An exchange traded fund (ETF) is a type of investment fund that holds a collection of underlying assets, including shares of a company, to give an investor exposure to this asset, which in this case would be the commodity. Gold ETF trading is a low-cost investment choice that can be bought and sold like any other share in the stock market. Read more about ETF trading and how to trade gold ETFs through this alternative method.

gold is often seen as a safe haven

How to trade gold

  1. Open an account with CMC Markets. Choose between a live account to get started straight away or practise with virtual funds on our demo account.
  2. Deposit funds into your account. Remember that spread betting and CFDs are leveraged products, so you will only need to deposit a small percentage of the overall value of the trade. Profits and losses will be based on the overall value of your position.
  3. Research when is the best time to trade gold. Certain political and economic events per region can have an effect on the price and volatility of the commodity market. This means that the risk of gold investment can either pay off or cause serious losses. Use our news and analysis page to keep aware of any changes to the gold market that may affect your trade.
  4. Monitor price movements. Keep up with the latest trends of your gold trade online using a range of our technical indicators.
  5. Think about your risk management strategy. Consult our money and risk management guide in order to place the appropriate measures in your trading strategy. We advise all of our clients to consider using a stop-loss order to reduce their losses to the absolute minimum.

Trade gold through commodity indices

It is also possible to spread bet or trade CFDs on baskets of commodities for all precious metals, including gold, silver, platinum and palladium. Our commodity index gives you exposure to multiple commodities in one trade, which can be vital for diversifying your investment portfolio. You can invest in gold along with range of other precious metals within the same position.

The most significant of the precious metals group, gold and silver are weighted to make up 70% of the index. Platinum and palladium make up the remaining 30% of the commodities basket. The indices work by tracking underlying prices of the commodities: if the price of gold, for example, increases within the index, then the overall value of the index will increase. In a similar manner, if the price of gold is to decrease, then the overall value of the index will decrease.

Trading the commodity indices market can be a good way for traders to explore gold trading without placing all hopes and efforts in one single commodity. A disadvantage of trading gold is that the asset can be volatile in the short-term. By trading our Precious Metal Index, a trader does not place all of his hopes in the value of gold and instead may hope that the other commodities will bring up the overall value and price of the index.

Looking to hold gold for consecutive years? You can invest into gold. See our article 'Is gold a good investment?' for more information.

*Tax treatment depends on your individual circumstances. Tax law can change or may differ in a jurisdiction other than the UK.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

Live account

Access our full range of markets, trading tools and features.

Open a live account

Demo account

Try trading with virtual funds in a risk-free environment.

Open a demo account

Demo account

Trade with virtual funds in a risk-free environment

Live account

Access our full range of products, trading tools and features.