How to trade Gold

Posted by Harry Johnson Jan 15, 2021

Gold has been enjoying the worth it has today since olden times. The Romans used to use this metal as a form of currency. To this day, gold still holds a prestigious status in today’s economic environment. The only thing that is different now is it is easier to trade gold comparatively.

Long time professional traders have been involved in online gold trading one way or another but those who are just looking forward to joining this profession will have a big question in mind. How to trade gold online? We will be looking for an answer to this question, how do you go about trading gold, what are gold CFD symbols and what are the ways to build up a daily gold trading strategy.

How to Trade Gold CFD

Gold trading can be done in a number of ways. One of the most obvious ways is buying the physical gold and then selling them for a decent margin of profit. But in this online world, the easier and profitable way is online trading of gold.

The ideal way for trading gold online is Gold Options or Futures, where gold is traded through a major, regulated exchange. But you will need a massive deposit to get into a good futures brokerage firm.

Other ways include trading shares in a Gold EFT (Exchange Traded Fund). They will own gold and the price fluctuations will closely mirror the fluctuations in the price of gold itself. Though this option will require some hundreds or thousands of dollars of investment with a firm and they will keep some hefty commissions.

Gold Mining Shares is another option. You could get share in a gold mining company as the value of such shares will be affected by the price of gold. However, this way introduces drawback such as lesser speed, costs and minimum deposit required on top of the fact that the value of gold is not the only fact affecting the price of the gold sharing prices.

One of the best online trading options is Gold Forex Trading or Trading Gold CFDs. Many forex trading brokers offer the option to trade Gold CFDs (Contract for Difference) and offer trading in Spot Gold. Spot gold trading refers to trading on the exact price of gold at that particular moment. This is one of the most cost effective, efficient and fast trading option for trading the precious metal. The CFD is represented as an option in trading platform by the name “Gold”, or they may use the CFD symbol “XAU/USD”, which represents gold price against the US dollar. Using a XAU/USD chart can prove to be quite beneficial for someone who is going towards the spot trading route.

Although this is the best online option for trading bullion, there are some major problems involved as well. One of these is the fact that some brokers demand a high commission or spread on the trades. But the bigger problem that this trading mechanism introduces is the fact that unless you close the trade by 5 p.m, New York time, the brokers will charge a fee for holding the trade overnight, for every day. This is usually called “swap” or “overnight financing fee”. Unless you are a day trader and have a very effective daily trading strategy, these costs might be higher than you need to justify a trade.

The ideal way for trading gold online

Gold Forex Trading Strategies

The strategies involved in trading gold are a little different as compared to other commodities usually used in trading such as crude oil. The reason for this is because bullion does not have any intrinsic value as it does not have so many practical uses. The value it enjoys is due to the fact that human beings are attracted to it and they consider it precious as agreed upon through mutual consensus. As there is no way to predict the human perception, fundamental analysis cannot play a big role in coming up with a strategy to trade gold.

Another big factor contributing to this uncertainty is the fact that unlike other traditional flat currencies such as the US Dollar, the supply of gold is very limited and most of it is owned by governments or banks. Nobody actually knows how much gold there actually is. So, the large banks which have spent years trying to “fix gold”, have a way to manipulate the perception of supply and demand.

Although analysts do come up with good gold CFD trading strategies or effective and efficient daily trading strategies for bullion. That is achieved by seeing the value of gold under certain economic conditions such as high inflation, economic crisis, a fall in the US dollar or during negative interest rates.

The bottom line is that historically, the precious metal has shown to see a rapid rise in price during unusually high inflation, severe economic crisis or negative real estate rates. The reason for this is the fact that during the time of these economic uncertainties, the stock markets plummet to new lows and people find refuge in the evergreen metal.

Gold Trading Hours

Now that we know what are the ways to go about trading gold and the main factors affecting the price of the metal, we should know what are the most profitable gold trading hours. What are the market times which will yield the most effective results?

Gold Forex Trading Strategies

The choice for the hours to trade in the market is a crucial one and traders mostly prefer to look for trading hours in which the price of gold goes into a directional manner. That allows them to better analyze and predict how the price will move. This largely depends upon the demand for gold in that specific time span.

There are many brokers present out there that provide 24 hours gold trading services but one should try and find the appropriate time windows in which to trade. If you are a US based trader, the most movement can be seen in the trading session between 16:30 to 23:00 (Eastern European Time), Monday to Friday.

The reason for this is because that is the time when the US stock market opens, which results in the opening of the activity on trading commodities as well such as gold CFDs and gold futures. In normal days, knowing when the market opens and the activity happening in the market will play a big factor as to how effective and profitable your trading will be.

If you like this article, you might also be interested in this How to trade Oil

Gold is considered to be a “Safe Haven” for the traders. The reason for this is that gold will most likely maintain its price even in an uncertain and plummeting market condition and might even see an increase in its price. This is because more and more people will seek refuge in the precious metal, causing the demand to surpass the supply of the bullion to the market.


Harry Johnson

Successfully passed the internship at the United States Department of the Treasury. Discovered trading at the university.

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