How to trade or invest in gold

Learn what gold investing and trading are

Gold investing and trading are two different ways to take a position on the future price movement of gold markets.

When you invest in gold, you’d take ownership of the asset upfront and profit if the precious metal rises in price. When you trade gold, you’re taking a position on the underlying price rising or falling – meaning you won’t be taking ownership of the asset itself.

There are several types of gold assets available for you to trade or invest in, depending on whether your interest is in the physical asset or not. These include:

• Gold bullion

Physical gold – in the form of coins and bars – is commonly used as a store of value, for both individual investors and banks. But the expensive safekeeping and insurance requirements often deter more active investors from buying the metal outright

• Spot gold

The spot price of gold is how much it would cost to buy upfront – or on the spot. It is usually the price of one troy ounce of gold. Trading spot gold is a popular means of getting exposure to bullion without having to take ownership of the precious metal

• Gold futures

Futures contracts enable you to exchange gold for a fixed price on a set date in the future. You’d have the obligation to uphold your end of the trade, whether that’s through a physical or cash settlement. Futures contracts are standardised for quantity and quality – only their price is driven by market forces

• Gold options

Options contracts work in a similar way to futures, but with no obligation to execute the trade when buying. Options give you the right to exchange either physical gold or gold futures at a specific price on a specific date. Call options give the holder the right to buy the precious metal, while put options give the holder the right to sell it

• Gold ETFs

Exchange traded funds (ETFs) track the movement of a basket of shares of publicly traded gold mining, refining and production companies. Trading or investing in an ETF gives you much wider exposure than you’d get from a single position, which makes them a popular way of diversifying a portfolio. ETFs are passive investments, which replicate market returns rather than seeking to outperform them

• Gold stocks

Trading on or investing in stocks can be a great way to get indirect exposure to gold. You can gain exposure to every element of the gold industry, from mining and production to funding and sales. It’s important to note that gold stocks don’t always move in the same way as bullion, as there are a lot of other factors that drive the prices of shares.

Understand what moves the price of gold

The price of gold is determined by supply and demand. There are a huge range of factors that can impact the market price, including:

Gold as a safe haven

Investors tend to rely heavily on gold in times of political or economic uncertainty, and the metal is often used as a hedging tool against inflation or currency devaluation.

For example, gold increased more than 13% between January and May 2020 during the Covid-19 crisis, due to rising market volatility. Investors started pulling money from cash assets in favour of the precious metal in order to combat the political, economic and social instability.

However, when any investment becomes too popular there’s the risk of a price bubble being created, which could send prices spiralling when it bursts. For this reason, many gold traders choose to diversify into other markets or manage their risk with stop-losses.

Decide how you want to trade or invest in gold

Choose which gold asset you’re interested in, and discover how to take a position below.

Open your first trade

There are a variety of gold markets you can trade with us, including our proprietary spot prices, futures contracts and options. Alternatively, you could get indirect exposure to gold via company stocks and ETFs.

Whichever gold market you decide to trade, it’s important to think about whether you’ll go long or short, what position size you’ll take and how you will manage your risk. We offer a range of solutions for risk management, including stop-losses and limit-close orders – these are used to close trades at predetermined levels of loss and profit respectively.

Choose whether to go long or short on gold

When you start trading gold or gold-linked assets via CFDs, you’ll be able to choose between buying and selling the market – also known as going long or short. You’d buy if you expected the asset’s price to rise in a given timeframe, and you’d sell if you thought its price was going to decline.

If you were going to invest in gold stocks and ETFs instead, you could only go long – taking advantage of a longer-term rise in prices.

To understand which way the market is likely to move, it’s important to do thorough research – both technical and fundamental.

Monitor your trade and close your position

Once you’ve opened your position, you can monitor your profit and loss in the ‘positions’ section of our platform.

While your position is open, you should keep up to date with news and continue performing technical analysis so that you can identify key turning points in the market.

Ready to open your first trade? Create an account now

When you decide it’s time to close your position, you can click ‘close’.

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