How To Trade Gold: A Beginner’s Guide

Gold trading is one of the oldest forms of investment. People have used this precious metal to store value for thousands of years. Now, gold is one of the most widely traded commodities.

Gold is unique because it can serve as a commodity for speculation, a hedge against volatility and inflation, and a long-term investment for people who want something that can store value for decades with limited risk.

Many investors treat gold as a safe haven investment when markets are volatile or experiencing significant downturns. This reduces their risk and exposure to potential losses.

Here is a look at how to trade gold using CFDs.

How can I begin gold trading?

There are several different ways to access gold markets.

Gold futures

A gold futures contract is an agreement to buy or sell gold at a specific price on a future date. These are available through some brokerage accounts and require more capital than CFDs.

Spot market

Gold spot markets allow you to trade like a currency pair. The most popular gold market is XAU/USD, which tracks gold prices as they relate to the US dollar.

Gold ETFs

Some investors choose a gold trading strategy that involves purchasing ETFs. Investing in an ETF that tracks gold prices offers greater diversification than a single stock.

Gold CFDs

CFDs closely track the spot market, giving you the same exposure as you’d get trading XAU/USD but with lower capital requirements and the ability to trade using leverage. If you can learn how to trade gold in forex markets using CFDs, you can access gold with limited capital.

How to trade gold successfully

CFDs provide the most accessible option for gold trading investors. If you trade metal CFDs, like the ones offered at TMGM, you can accurately track the gold spot market.

Several factors also affect the gold market, which you will need to be aware of before implementing your gold trading strategy. Ask yourself:

  • Is market sentiment risk-on or risk-off?
    Pay attention to how the market is currently performing. If there is a high level of perceived threat in the market, investors typically flock to safe haven assets, like gold, to minimise their risk.
  • How is the USD performing?
    When the USD is strong, the price of gold is steady or drops slightly. However, when the dollar weakens, the price of gold can shoot upward. Traders often look for signs of weakness in the US economy before deciding whether or not to purchase gold.
  • Is the physical demand for gold high or low?
    High demand for gold can strike in two scenarios: market volatility due to inflation, political threats or natural disasters and if an industry requires gold to make its products. The best time to trade gold is during times of high demand.
  • Is gold in low supply? How much is being mined?
    Supply spikes can come from a new mining discovery or increased output. Do your research to uncover how much gold is currently being mined, where supply levels are forecasted to go and if demand is predicted to skyrocket.
  • Will I use technical analysis to analyse the gold price trend?
    You will need an excellent trading platform, the right indicators, and price-action patterns. MetaTrader 4 is an excellent charting platform that offers a wide range of indicators. If you prefer to trade gold-related share CFDs, you can use IRESS, a modular platform that offers both trading and data windows, which you can see simultaneously on your trading dashboard.

Investors should always seek an ASIC-accredited and regulated brokerage for gold trading like TMGM. Visit our site to open a gold trading account, or contact us 24/7 with questions or concerns.

How much money do you need to trade gold?

If you wish to trade gold futures or spot gold, you will need a great deal of capital. However, you can get started with a more modest deposit with TMGM if you trade gold CFDs. CFD brokers, like TMGM, allow you to use leverage to increase your position size without committing to the upfront cost.

On TMGM, we offer a leverage ratio of up to 1:400 for precious metals. With 1:400 leverage, you can control $400 for every dollar of your own capital. You can potentially open a $40,000 position with a $100 deposit.

What is the best time to trade gold?

The best time to trade gold depends on your strategy. Longer-term strategies involve purchasing gold when you see indicators of economic upheaval, inflation, and other factors. You’ll want to open your position before the markets start reacting to these factors by initiating your trade as soon as possible.

Short-term strategies involve trading during market hours of major economies. Typically, the biggest movements in price happen within the hour or so after the market opens.

Frequently Ask Question

There are no definitive answers on whether traders can make money from trading gold. This will come down to a trader’s risk management strategies and implemented analysis methods. Most of all, gold trading requires specific market conditions.

The most accessible and cheapest method of gold trading is to open a CFD account and trade the gold spot market (XAU/USD). When using CFDs for gold trading, you should always rely on regulated brokers like TMGM, as we can provide a safe and regulated trading platform.
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