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.
Investing in gold in the UK is one of the most popular forms of trading. 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. The yellow metal comes in many forms, including gold bullion, gold coins and gold stocks in the share market.
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, unlike some shares in the stock market, its price is not always affected by governmental decisions or inflated by interest rates. 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 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 their share positions are declining in value, some traders 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 trading strategy. This way, traders 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.
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.
Spread betting and CFD trading are also popular options, and CMC Markets offers both 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, and the common trading hours that we offer for gold trading. We also have a brand new US Gold share basket to trade through spread bets or CFDs, which tracks the top 15 shares within the gold industry. This basket is valued at around $20 million and gives exposure to the largest gold stocks in the US, including Newmont, Barrick and Franco-Nevada.
This is one of our most popular products for trading on gold. Gold spread betting 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 (contracts for difference) 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. Read more about the meaning of CFDs here.
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.
Expecting big things in energy? Diversify your portfolio and spread risk with our unique commodity indices, which allow you to take a view on a commodity sector as a whole with a single position.
You can also spread bet and trade CFDs on a wide range of gold stocks within the share market, instead of investing in physical gold. This is an effective way to gain exposure to the underlying asset without physically owning the gold product. At CMC Markets, we offer over 8000 stocks and ETFs to trade on a worldwide level on our online trading platform.
Traders should open a position based on whether they think the share price of the gold company will rise or fall, and subsequently profit or lose based on which direction the price movement heads. Below is a list of some of the largest gold mining stocks right now.
Franco-Nevada – this company is also based in Toronto, Canada, and is a leader in gold streaming and royalty. Franco-Nevada pays a healthy dividend and has consistently steady balance sheets, making it a great gold stock to invest in. The company covers gold, silver and other precious metals, as well as oil and gas, although the majority of its revenue comes from gold.
Petropavlovsk – one of Russia’s major gold mining companies, Petropavlovsk also has offices in London and accounts for a small part of the FTSE 250 stock index. The company claims to have advancements in production, reserves and resources, with the aim of offering a responsible and low-cost output of gold.
Newmont Goldcorp – this company currently ranks first in the world as a gold supplier. It has mining operations in five continents, which amounts to approximately 180 tonnes each year. Newmont Corporation acquired the Canadian company Goldcorp in 2019, merging the two gold suppliers together to become Newmont Goldcorp.
Newcrest Mining – Australian-based company Newcrest Mining apparently has the largest group gold ore reserves in the world, which makes it one of the top gold stocks. It focuses on the exploration, development and sale of gold across four countries.
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.
ETFs give traders the opportunity to diversify their portfolio by investing in a number of gold shares, rather than a singular one. Below is a list of the main gold ETF competitors to trade on our platform.
iShares Gold Trust – this exchange-traded fund seeks to reflect the price of gold in general. It has one of the lowest expense ratios for gold ETFs, which is attractive for investors that are conscious of extra costs.
Aberdeen Standard Physical Swiss Gold Shares – also issued to reflect the performance of the price of gold bullion, this ETF is designed to be cost-effective and convenient, as an alternative to purchasing and storing gold directly.
As mentioned, we offer a large number of shares and ETFs, as well as the physical gold commodity, to spread bet and trade CFDs on through our web-based trading platform, Next Generation. Our price charts are customisable to your trading preferences, so you can see your data displayed as clearly as possible when entering and exiting positions.
Register for a live account now to start trading on gold, or you can practise first with £10,000 worth of virtual funds beforehand in order to familiarise yourself with our award-winning platform.
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How can I trade gold?
There are many ways to trade gold with us. You can spread bet or trade CFDs on gold, gold-mining stocks, ETFs or via our Precious Metals commodity index. You can also invest in gold directly instead of trading derivatives, so read our guide on is gold is a good investment?
Is gold a commodity?
Gold is traded within the commodity market but it can also be seen as a currency or a medium of exchange. In the forex market, for example, the US dollar is fixed to the price of gold and it can be used as a long-term safe haven in case of political or economic instability. Learn how to trade commodities.
What affects the price of gold?
Many factors can affect the price of gold, including supply and demand, inflation rates, economic data and announcements, currency movements and political instability. Keep up to date with our economic calendar to monitor future events which could affect the commodity markets.
How can I become a successful gold trader?
There is no guarantee that you will be successful in gold trading, but the first step to take when entering the market is to create a trading plan. Ideally it will combine elements of fundamental and technical analysis, involving analysing price charts and economic data. The gold market can be volatile, so it’s important to consider managing your risk.
When is the best time to trade gold?
Given that the price of gold often corresponds with the US dollar, a popular time to trade on gold is often when western markets are open, including the London and New York trading sessions. You can also trade on gold, including gold forward contracts, outside of typical market hours.
*Tax treatment depends on your individual circumstances. Tax law can change or may differ in a jurisdiction other than the UK.
**Leveraged ETFs are complex financial instruments that carry significant risks. Certain leveraged ETFs are only considered appropriate for experienced traders.
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