Trading Gold

Whether you are looking for a hedge against inflation, a speculative commodity play, or want exposure to alternative assets, Gold trading could meet your needs. In the sections below we will examine the basics of Gold trading. Please be aware that as with all leveraged products, trading in the Gold market can involve significant risk and investors could lose more than their original investment.

What Are Precious Metals?

Precious Metals are tradable commodities that have a high economic value. They are difficult to find and their ores can be expensive to extract. These metals are considered to act as “safe haven“ investments in times of political uncertainty or economic turmoil. As such they provide an alternative to investing in other financial instruments such as stocks and Bonds. Gold and Silver are the two most recognised and actively traded of the precious metals.

What is a spot Gold contract ?

Blackwell Global offers its clients the ability to trade rolling spot contracts in Gold. Which are non deliverable and are settled for cash when the contract or position is closed.
Gold is usually priced and traded in units known as troy ounces, which are equivalent to a weight of approximately 31 grams. As with the majority of commodities, Gold is priced in US dollars. The standard lot size or trade amount for our spot Gold contract is 100 troy ounces. However Blackwell clients can trade from as small a size as a micro lot or 0.01 of standard lot. The equivalent of one troy ounce.

Market participants

There are various types of participants in the Gold markets and they fall into three main categories :

Investors and Central Banks.

Long term investors and Central Banks use Gold to diversify their exposure and as an alternative reserve currency. Recent data shows the US Federal Reserve held more than 8000 metric tonnes of Gold within its reserve currency holdings Germany.The IMF or International Monetary Fund, Italy, France and China all had a holding in excess of 1800 metric tonnes. See the chart below.

trading gold

Investor demand for Gold in the first half of 2016 accounted for almost half of the total demand for the metal much of this investor demand came from developed western economies Gold demand summary.

Commercial Producers, users and hedgers.

This group contains the industrial users and producers of Gold such as Miners, Refiners, Jewellery Manufacturers etc, Who use the Gold markets to secure the supplies of Gold they need, or indeed to sell Gold they have produced or stockpiled.From a demand standpoint Jewellery and Technology accounted for some 43% of total Gold demand according to recent data from the World Gold Council.

Speculators

Our third group, the speculators are focused on trading Gold. That is to say they aim to profit from the rise and fall in the price of Gold. As such speculators are unlikely to require physical delivery (unlike the participants in the other two groups.) Speculators can take advantage of the flexibility offered by our cash settled non deliverable spot Gold contracts. They can buy or sell Gold with equal ease, without having to worry about contract expiry or delivery dates associated with other forms of Gold trading.

Each of these three groups has a different objective, yet each adds liquidity to the markets and influences the Gold price.

Trading long or short

One of the advantages to trading cash settled spot Gold contracts, is the ability to trade long or short with equal ease. Long positions are the equivalent of a purchase. Whilst short positions are an opening sale trade . A speculator who trades long has most likely bought Gold in the expectation of a rise in the underlying price. Which they believe will allow them to sell their position at a higher price for a profit. Whilst the speculator who has gone short, has most likely sold Gold in the expectation of fall in its price. Which in turn they hope will allow them to buy their position back at a lower price and hence book a profit.

Other advantages of spot Gold contracts

As we have already noted spot Gold contracts are non deliverable and are settled for cash. This means that private clients and non professional traders can trade Gold without worrying about having to take physical delivery of actual Gold bullion. Blackwells spot Gold contracts trade 23 hours a day 5 days a week.

Clients can trade them seamlessly from either the desktop (PC) or mobile (Android/ IOS) versions of the Blackwell Trader MT4 platforms. You can even practice your technique before committing your cash with one our Demo Trading accounts.

There are no contract dates,expiries or delivery months to consider in our rolling spot gold contracts. Therefore there is just one price for traders to monitor, rather than a range of prices, one for each a specific month, as found when trading futures contracts for example.

It’s also possible to trade smaller position sizes using our spot Gold contracts.Clients can make a trade in spot Gold that is as little as one one hundredth of a lot.

Leverage

Leverage or gearing is the ability to magnify the value of your trading account. Allowing you to control a much larger position in the market than your initial investment, or deposit would otherwise allow. In effect your broker lends you the money required to take that larger position and charges you interest on the value of the underlying position, if you choose to hold it open over night. The use of leverage can multiple your potential Gold trading profits but it can also do the same thing for trading losses.(For details of the leverage available in our spot Gold contracts please see leverage). As such it’s essential that you fully understand the risks inherent in leveraged instruments before you commit to risking your capital in live trading.
To get a handle on how leverage works in Spot Gold trading without taking any risk you can simply open one of our free Demo Accounts.

Contract specifications

As we noted above the lot size of our spot Gold contract is 100 troy ounces .The minimum tick size or price movement is 0.01 of a dollar. Therefore each cent move in the price of Gold represents a P&L change of $1.00 in a position of 1 lot .

Thus if your are long 1 lot of spot Gold at $1300.00 and the bid price moves up to $1300.50 then you will have a running profit of $50 on the trade.

For full details of our contract specifications please see Precious Metals

To summarise

Gold is a scarce and valuable commodity that is actively traded around the world. It is priced in US dollars and traded in units known as troy ounces. Blackwell Global offers spot Gold contracts which are non-deliverable and cash settled, with positions sizes as small as 0.01 of a lot or 1 troy ounce. A full lot is a contract over 100 troy ounces. Clients can trade long or short and profit from both rising or falling markets.Our spot Gold contracts can be traded 23 hours a day, 5 days a week.They are a leveraged product and rollover interest is charged or credited if positions are held overnight.