Gold trading: how to trade gold

Published on: 22/12/2021 | Modified on: 08/08/2022

Gold is one of the most widely traded commodities around the world and certainly the most popular of the precious metals, for both its financial and cultural value. It comes in several forms, including bullion and coins within the commodities market, stocks and ETFs in the share market, and even as a currency. Continue reading to discover what moves gold prices, who are the biggest producers in the world, and how to get involved with the yellow metal through our derivative products such as spread bets and CFDs.

KEY POINTS

Gold comes in the form of bullion, currency, spot and futures prices
It’s often referred to as a “safe haven” due to its resilience against market downturns
China, Russia, and the US are the world’s biggest producers
Prices are affected by interest rates, inflation, the US dollar, and supply and demand
You can trade derivatives on spot and underlying futures prices

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Content Links

The value of gold
What are its different forms?
Who are the biggest producers of bullion in the world?
How to trade gold
What are the different ways of getting involved?
Is it better to trade spot or futures?
What moves gold prices?
Is there a commodity index that tracks gold?
How to get started on our platform

The value of gold

Historically, the commodity’s price has fluctuated often depending on political, social and economic instability. It’s sometimes referred to as a ‘safe haven’ by traders because, unlike most shares in the stock market, its price is not always affected by governmental decisions or inflated by interest rates.

On the contrary, the precious metal can act as a form of insurance, as traders might reallocate assets into the market at unstable times. This could increase its value, since demand might rise as traders attempt to use the metal as a stock hedge. It’s priced in US dollars and tends to have a negative correlation with stocks and bonds, depending on the stability of the economy.

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 way, traders are attempting to diversify their portfolio as they spread their bets across a range of markets.

You can speculate on our gold cash price, along with other precious metals such as silver and platinum, so view our spreads, margin rates, and prices below to get started.

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What are its different forms?

The precious metal appears in several forms within the commodity, currency, and share markets, which are detailed below.

Bullion: its physical form usually comes as coins or bars. Investors that purchase the physical commodity outright must then find a method of transportation and storage, which can be a costly process.
Spot: this is the immediate price that it costs to buy upfront, and the main unit of measure is in troy ounces. Traders can speculate on spot or cash prices (in USD) as a way to gain exposure to the metal without taking ownership.
Futures: these contracts allow you to set an agreement to exchange the asset for a fixed date and price in the future, whether this be the physical asset or cash settlement. Our derivative equivalent of a forward contract is based on the underlying price of the future.
Currency: it can also be traded using its currency code of XAU. Most of the time, it’s priced in dollars (XAU/USD), although it can be converted to any currency such as XAU/EUR or XAU/JPY. It’s often affected by movements or volatility within the forex market.
Stocks: gold stocks involved in the mining, refinement, and export of the metal can help to give traders exposure, such as Franco-Nevada, Newmont, and Sibanye-Stillwater.
ETFs: there are two types – one attempts to replicate the performance and price of physical bullion, and one tracks indices related to mining stocks like those mentioned above.

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Who are the biggest producers of bullion in the world?

According to the World Gold Council, the 10 top gold producing countries are as follows:

Country	Tonnes
China	368.3
Russia	331.1
Australia	327.8
United States	190.2
Canada	170.6
Ghana	138.7
Brazil	107.0
Uzbekistan	101.6
Mexico	101.6
Indonesia	100.9

According to Statista, the 10 top gold producing companies in the world are as follows:

Country	Tonnes	Million ounces
Newmont [NEM]	US	5.91
Barrick Gold [ABX]	Canada	4.76
AngloGold Ashanti [AU]	South Africa	3.05
Polyus [PLZL]	Russia	2.77
Kinross Gold [K]	Canada	2.37
Gold Fields [GFI]	South Africa	2.24
Newcrest Mining [NCM]	Australia	2.15
Agnico Eagle [AEM]	Canada	1.74
Polymetal [POLY]	UK	1.40
Harmony Gold [HMY]	South Africa	1.38

Although China accounts for approximately 11% of global production, the highest of any country, none of its mining companies appear on the list above.

Due to the global Covid-19 crisis, production fell for the first time in over a decade, and many analysts have argued that the world has reached its “peak gold”, suggesting that the production of the precious metal will continue to fall as the years go by. However, this is disputed by many as the demand still seems to be high.

How to trade gold

Choose your method of trading. Decide whether you want to spread bet or trade CFDs on the price movements of the physical commodity.
Deposit funds into your account. Remember that these 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.
Research the best time to trade. Certain political and economic events 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.
Monitor price movements. Keep up with the latest price trends online using our range of technical indicators, such as moving averages and stochastic oscillators.
Think about your risk-management strategy. Consult our money and risk management guide in order to place the appropriate measures in your trading strategy and reduce losses to a minimum.

Choose between a live account to get started straight away or practise first with £10,000 worth of virtual funds on our demo account.

What are the different ways of getting involved?

Spread bets

Gold spread betting allows you to trade tax-free* on price movements without taking ownership of the physical asset. You can go long (buy) or go short (sell) based on whether you believe its price will rise or fall. Depending on if the market moves in your favour or not, profits or losses will occur.

Contracts for difference

CFD trading is another leveraged product that only requires a trader to deposit a small percentage of the overall trade value, which is referred to as margin requirement. Unlike buying the asset outright, you agree to exchange the difference in value from the time in-between opening and closing the position.

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

Is it better to trade spot or futures?

If a trader doesn’t want to buy or sell bullion upfront, perhaps another option would be to speculate on the gold spot price, which reflects the exact valuation of the metal at the current time. Using spread bets or CFDs, you can take a short-term position on our cash instrument based on which way you estimate the physical market to move, with no fixed expiries.

Alternatively, our forward contracts are based on underlying futures prices of the market. When you trade on our gold forwards, this involves taking a buy or sell position on the derivative asset with a fixed price and fixed expiry date in the near future. In the physical market, however, gold futures are listed on the COMEX (The Commodity Exchange Inc), which is the primary exchange for precious, base, and ferrous metals. It belongs to the Chicago Mercantile Exchange (CME), the world’s largest derivatives exchange. Learn how forward contracts work in relation to underlying futures prices.

What moves gold prices?

Global supply and demand. The precious metal is used in many ways, including for jewellery, investments (mainly gold ETFs), central banks, technology, and dentistry.
Interest rates. When these rise, the metal’s price tends to fall as traders turn to fixed-income assets that will help to make them more money. On the other hand, when interest rates fall, this indicates that the economy is possibly declining, and this is when traders flock to the safe haven asset.
The US dollar. The two assets have an inverse relationship, meaning that when the value of the dollar falls, the price of the commodity tends to increase, and vice versa.
Production rates. If analysts are correct and the world’s natural resources are running out, there will be reduced mining and production of the metal. This will cause demand to outweigh supply, leaving companies to ponder other options – deep-sea mining is a particularly controversial option that some companies have expressed a desire to explore.
Inflation. When inflation is high, this is interpreted by most that the economy is flourishing. Some traders decide to hedge with gold rather than fiat currency, as consumer goods become more expensive, therefore lowering the value/purchasing power of USD.

Is there a commodity index that tracks gold?

We have created a bespoke commodity index that provides exposure to multiple commodities in one trade, a vital move for diversifying your portfolio. You can trade on multiple metal instruments using a single position.

The two 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, so if the price of bullion, for example, increases within the index, then the overall value of the index will increase. In a similar manner, if the price is to decrease, then the overall value of the index will decrease.

By spread betting or trading CFDs on our Precious Metal Index, you won’t be placing all of your hopes and expectations into one single commodity; rather, the others may help to bring up the overall value and price of the index if some are to fall in value.

Learn more

Trade on the spot price of gold, silver, palladium, and platinum using a single position.

Explore our Precious Metals Index

We also have a brand-new share basket that tracks the top 15 shares within the industry. This basket gives exposure to some of the largest related stocks in the US, including Newmont, Barrick, and Franco-Nevada, which amount to around $20m in market capitalisation.

See weightings, trading hours, and holding costs for our US Gold share basket.

How to get started on our platform

As mentioned, we offer spread betting and CFD trading on spot (cash) prices, as well as a large number of related shares and ETFs, through our derivative gold trading platform, Next Generation. Our price charts are customisable to your preferences, so you can see your data displayed as clearly as possible when entering and exiting positions.

Get started now by opening a live account, or practise first with £10,000 worth of virtual funds on our demo account.

FAQs

How can I become a successful gold trader?

There is no guarantee that you will be successful in gold trading online, 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 market can be volatile, so it’s important to consider managing your risk.

When is the best time to trade gold?

Given that its price often corresponds with the US dollar, a popular time to trade is often when western markets are open, including the London and New York trading sessions. You can also trade forward contracts outside of typical market hours.

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, its price is fixed to the US dollar and the precious metal can be used as a long-term safe haven in case of political or economic instability. Learn how to trade commodities.

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

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