What are gold futures and how do you trade them?

Understand the basics of futures contracts

Futures contracts are standardised agreements to buy or sell a specific amount of an asset at a predetermined price by a certain date in the future. These contracts are legally binding and traded on exchanges. It's crucial to understand how these contracts work, including concepts like margin requirements, contract specifications and settlement procedures.

Discover the ins and outs of futures trading

Open a live trading account

To start trading futures on our award-winning trading platforms,¹ you can create a live account with us. We have a diverse range of listed futures that you can trade using our US options and futures account. We also have futures and forwards offerings that you can access using a CFD trading or spread betting account respectively.

Research the gold market

Thorough market research is essential. Study historical gold price trends and analyse factors that may influence prices. These include:

• Geopolitical events: wars, political instability or international tensions can – given gold’s reputation as a safe-haven asset – drive the commodity’s prices up

• Supply and demand: mining output, central bank purchases and industrial demand affect gold prices

• Economic data: inflation rates, interest rates, gross domestic product (GDP) growth and currency fluctuations can impact gold prices

• Market sentiment: trader and investor confidence and risk appetite influence gold’s overall appeal and, in turn, its market price

Decide on a trading strategy

Your trading strategy should align with your financial goals, risk tolerance and available time. Some trading strategies include:

• Trend following: you'd aim to identify and follow market trends by analysing historical data to forecast potential future price movements

• Mean reversion: this strategy is based on the concept that asset prices tend to gravitate towards a long-term average. You’d look for instances where an asset’s price deviates significantly from its historical average with the expectation that it’ll likely return to that average over time

• Spread trading and arbitrage: these strategies aim to profit from price discrepancies by simultaneously buying and selling related assets or contracts. In the case of calendar spreads, for example, you’d buy and sell contracts with the same asset but different expiration dates

• Momentum trading: this involves buying futures that are experiencing a strong upward price movement and selling those with downward momentum

• Breakout trading: a strategy that involves entering a position when an asset's price moves outside a defined support or resistance level, accompanied by increased trading volume

Monitor your positions and manage your trades

Active management of your trades is crucial. You can use risk management tools like stop-loss orders, which automatically close your position if the underlying asset’s price moves against you by a specified amount. You can also use limit orders, which lock in possible profits by closing your position when it reaches a predetermined profit level.

You should regularly review and adjust these orders based on market conditions and your risk tolerance.

Stay informed about market news and developments

Gold prices can be highly sensitive to news and economic data, such as:

• Economic indicators: inflation rates, employment data and GDP figures

• Central bank policies: interest rate decisions and quantitative easing programmes

• Geopolitical events: elections, conflicts and trade agreements

• Industry news: mining output and technological developments in gold extraction.

Always use reliable news sources and economic calendars to stay informed and adjust your trading decisions accordingly.

How do I choose a futures trading platform?

When selecting a trading platform on which to buy and sell gold futures, consider the following factors:

• Trading tools: does the platform offer powerful tools like comprehensive charts, technical indicators and real-time market data?

• Reliability: is the platform robust and stable, even in periods of heightened market volatility?

• Fees: are the fees and charges that you’ll pay made clear to you on the platform?

• User experience: is the interface intuitive and user-friendly? Is it suitable for both beginners and advanced traders?

• Research and education: do you have access to market analysis, research reports and educational resources on or via the platform?

You can trade listed futures on our US options and futures platform, which – in addition to commodities like gold – gives you access to futures on indices, forex, interest rates, volatility and more. When using this platform, you’ll take positions via outright futures contracts that track an underlying’s spot price.

You can also trade on futures using our flagship over-the-counter (OTC) platform. With this platform, you’ll be speculating on the prices of futures contracts using spread bets or CFDs. Here, in addition to futures on gold and other commodities, you’ll have access to index and bond futures as well as share, exchange-traded fund (ETF) and forex forwards.

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