Gold trading is not all about buying and selling the physical asset. In fact, online trading can provide more benefits and this is where gold trading in CFD brokers comes.
Gold has always been everyone's favorite when it comes to investment. However, did you know that you can easily invest in gold without buying the physical asset? If not, you should start paying attention because trading gold as CFD offers a big deal of benefits with promising returns.
Well, to answer this question that you probably have in mind since the very beginning, let's unpack this fact. These days, forex brokers did not only provide traders with currency trading but also connected clients to other potential markets through its CFD offering.
If you wish to trade in gold, not the physical but the online one, you should consider the offering of XAU/USD trading in forex brokers. It is just like any other trading pair like EUR/USD, GBP/USD, and so on. Meaning, you can earn profits from the price difference.
The practicality in trading gold this way can be seen when you can benefit from both the price rise and fall. It's pretty much different when you're trading physical gold because you can only get a profit from the price increase.
Apart from that, there are other advantages that you may consider:
- Accessible to everyone
- Cost-effective
- More flexible
- High liquidity
- Easy to diversify
To learn more about how trading gold in CFD can benefit you, let's look at this article!
1. Accessible to Everyone
You should notice that whenever someone wants to trade their physical gold, one needs to wait until the office hour is open and go to a certain store to make a profit from gold. You certainly won't face this issue because trading gold CFD means you don't have to hold the asset in order to benefit from the price movement.
This certainly provides more access for everyone who wants to trade gold from anywhere they want. In fact, trading gold CFD can be done with just a few clicks and only need an electronic device (PC/laptop/smartphone) with a good internet connection aside from the capital that you use to open trades.
2. Cost-Effective
One thing that differentiates trading gold in CFD brokers and the traditional way of trading the physical asset is you will not get any extra costs for storing or transporting the instrument. Since everything is traded online, you can eliminate any additional cost that comes with buying or selling physical gold.
3. More Flexible
When trading gold CFDs, you don't need to wait until the price moves up to sell your asset. The high liquidity of gold CFDs allows you to take advantage of price movements whether the market is rising or falling. If you predict the price of gold will rise, you can make a long position (buy). Conversely, if you predict the gold price will move lower, you can make a short position (sell).
Furthermore, trading gold in CFD brokers is more flexible because CFDs are leveraged financial products. You do not need to make a deposit of the full amount of your trade size. With leverage, you only need to make sure that you have the margin required to open a trade, which is usually 10x to 100x smaller than the actual size depending on what leverage you use.
For example, if you get 50:1 leverage for a $50,000 position size, you only need to provide $1,000 as the minimum margin to open a trade. When the leverage is 100:1, you only need $500 to open a trade.
4. Liquidity
The estimated gold trading volume is around $70 billion per day, more than most currency pairs except some major currency pairs. High trading volume results in high liquidity for gold CFDs.
With high liquidity, gold CFDs are cheaper to trade than other financial instruments, and the commissions charged are usually very small. In addition, selling CFD contracts is also easy due to the high liquidity, unlike what happens in physical gold transactions.
5. Easy to Diversify
If you are new to trading, you might wonder what exactly is risk diversification. Any investment is not without risk and one should secure their investment in order not to lose all of their investments when a market is going down. One of the most effective ways to reduce such risk is called diversification.
To do this, you only need to divide your investment into various types of assets. So, whenever an asset price is at a disadvantage, you won't lose all your money. Trading gold in CFD brokers is fast and easy, so you don't have to go through many processes whenever you want to change from gold to other assets.
In addition, gold is known as a safe haven so one may look into other riskier assets if they want to pursue higher profit opportunities during risk-on conditions.
Now that we've explored the 5 benefits of gold trading in CFD brokers, you may wonder where to start. Any forex brokers offering CFD trading basically provide the opportunity to trade gold CFD. Still, there are certain things to consider when it comes to choosing a good broker to trade gold.
6 Comments
Feb 22 2023
Dude, I'm very new to these things. I mean, as far as I know as an Asian in my country. Always buy gold, store gold, wait years and then sell it for a profit. And my parents have been doing this for many years. It is normal day for Asian people. However, I've never heard of a gold trading system like this. Means a transaction that does not require the storage or transportation of the instrument. So you mean trading gold without a physical asset, right? It was nice, but very confusing.
Ok, I agree that without storage and transportation, gold transaction costs would really go down. The question is how gold CFD trading works. How can I trade with other forex trading?
Feb 22 2023
Yoga: Simply to say, trading gold here is basically trading the value of gold rather than an asset. That is why it was called CFD (Contract For Difference). Therefore, when you click the buy button, you will automatically trade at the bid price. If the price is higher, buying the bid price in the meantime will give him a profit, and if the price is lower than that, he will get profit if only he hits the ask price.
The gold market is no different than traditional gold trading, with all gold prices coming from the US and UK markets. And of course the US dollar has a fundamental lie as it is paired with the US dollar as a currency pair and is usually its gold counterpart. So when economic news about the US dollar comes out, it affects the price of gold and many other things. You can read the basics of gold here : The Influence of Commodity Prices and Stock Market On Forex.
Feb 22 2023
The author said trading gold is very similar to trading foreign exchange like EUR/USD. So I've been thinking about the possible fundamental analysis in gold trading. Basically, forex trading requires fundamental analysis and technical analysis to be successful in forex trading, right? So, I am curious about the fundamental that may lies in Gold, meanwhile technical analysis obviously can be known by the chart.
The question is what fundamental analysis hides in gold trading. And the final question concerns trading style in trading Gold. I know that scalping can be done on EUR/USD, but I'm not sure if gold CFDs can also be scalped too. Thank you
Feb 22 2023
Jaycee: Fundamentals of Gold are heavily influenced by the current global economy. As you can see, in 2022; the price of gold is higher than before due to a truly uncertain global economy. It encourages many investors to back their assets with gold. Gold is a safe haven asset, so whenever the economy is headed for crisis or deterioration, the price of gold will rise, and when the global economy returns to normal, the price of gold will return to its normal price, and the value of the asset will return to its original price, will be the same as It was before the crisis.
On the other hand, the price of gold is also affected by the US dollar. It is believed that when gold prices rise, the US dollar falls and vice versa. So gold fundamentals are indeed real.
About scalping gold trading styles. It's very possible but of course it is more low volatile depends on the situation make the opportunity to do the scalping also less chance too
Feb 22 2023
Based on the author's statement, we can conclude that trading gold on CFDs sounds very risky, but because gold trading is also traditionally risky and can involve the risk of becoming a bugler. , is also more dangerous.
Otherwise, both risks should be considered at risk. Is traditional gold trading or CFD gold trading more profitable? On the other hand, is trading traditional gold or gold CFDs better for beginners? Thank you very much!
Feb 22 2023
Tristan: As for the risk of being stolen in traditional gold trading, what you called buglers is true. For this reason, many investors choose to purchase a safe or store their gold in a bank, which comes with storage costs. On the other hand, gold CFDs have the same risks as forex trading.
However, if you want to be more profitable, gold CFDs are more profitable as they are able to profit in both bull and bear markets, whereas traditional trading is profitable until the market becomes bearish. Also the cause of profitable in Trading Gold CFD because CFDs and gold contract sizes are very large, even small prices affect the meaning of profit/loss, whereas traditional gold trading is based on the amount of gold bar and its weight. Even you will also get leverage, like the author says in the article. Leverage cannot be obtained through traditional gold trading, so more money should be prepared.