How do you Trade Gold?

November 30, 2020
by Nick Alexander, Market Analyst

Article Recap

Gold market is attractive to traders due to high liquidity and its status as safe-haven.

The Gold market is attractive to traders due to the markets high liquidity. Traders have opportunities to make the most out of volatility due to the unique position this particular precious metal has within the world’s economic and political systems. However, how do you trade Gold? 

There are two ways to participate in the Gold market, you can either buy Gold outright or you can speculate on its price through CFDs without having to own the asset. To do this you will need to place a small initial deposit in order to gain exposure to the asset’s underlying value. It is important to note that losses can also exceed deposits. 

Before you enter the financial markets you should fully understand the asset you want to open positions on. Most beginner traders make more losses due to not having a trading strategy in place. To understand how to trade this yellow metal, you’ll need to get to grips with the unique characteristics of the gold market. This guide will explain how to prepare for price movements in the gold market.

Key steps to trading Gold

What causes the price of Gold to move?

Understanding what moves the yellow metal is imperative in order to make the most out of executing trades within this particular market. Gold is one of the oldest currencies in the world, dating back to B.C where the precious metal was used for jewellery and was also seen as a symbol of wealth and power. There are a range of factors which affect the price of gold; inflation, supply and demand levels and social and economic news which cause global financial markets to move. If economic news causes a strong sell-off in forex, traders will then turn to Gold which causes a rally. This rally could be caused by market fear where traders turn to the yellow metal making it a safe haven asset.

Reading and Analysing Price Charts

Studying Gold’s price throughout history will give you an overview of how its price changes and what affects its price to change. Identifying past trends will also strengthen your approach when taking a technical standpoint. This way you will be able to determine key price levels due to what has happened in the past.

Plan and Prepare for Your Trade

Trading Gold can spark a various range of emotions especially when traders flee to this precious metal as a safe haven asset, at times when other markets are turbulent. You could create a plan which is tailored to Gold and its price movements. Read our guide on how to create a successful trading plan.

Learn how to manage risk when trading Gold 

You should also come up with a risk management plan to protect yourself from any unexpected price movements that could occur on the Gold market. In our risk management guide, we explore the risks you face when trading CFDs as well as looking at ways where you can minimise the risks.

How can I start trading Gold with Eightcap 

You can start trading Gold CFDs today. CFDs are a leveraged product and you will need to deposit a small amount of the overall value of the trade. This is known as a margin requirement. This way you don’t have to own the underlying asset but you can speculate on rising and falling prices. Even though profits can be magnified, it is important to note that losses can also exceed deposits. 

Open an account with Eightcap to get started or you can also practise trading Gold with virtual funds via our free demo trading account.

Trading on margin is high risk. 

All times are AEDT.