How to Start Online Gold Trading: A Beginner’s Guide

Introduction 

Commodities and the benefits of online gold trading platforms include the great convenience of immediately buying and selling gold without ever having to leave home. If you are new to the world of commodities trading, this article will help you answer some of the many questions that may be swirling around in your head about how you can trade gold online. If you are new to online gold trading, the process may seem daunting at first. The good news is that it does not have to be complicated or expensive to get started. In this beginner’s guide, we will show you how to start trading gold online, including what you need to know about the different types of gold traded, the best platforms for trading gold, and how to set up your account and place your first trade. 

Gold is as Precious Metal 

In today's world, gold is worn as jewellery, used as an investment, and even has applications in fields such as health and technology. Despite this, the precious metal has been employed in financial transactions for a considerable length of time.

But what is it about gold that makes it so unique? What factors contribute to the fact that silver and palladium, for example, are not the most widely traded precious metals? Gold has nearly never been broken, despite the fact that its colour and brilliance (its one-of-a-kind shine) have made it appear to be rather desirable throughout history. Gold is available in sufficient quantities to provide market liquidity while being scarce enough to prevent producers from flooding the market with it and driving down its price.

Gold has always held a significant emotional significance for humans, and this link has carried through into modern times. 

Source: https://capitalxtend.com/

What is Gold Trading? 

Gold is one of the oldest commodities traded on financial markets. Its recognizable yellow color and high value have made it a popular asset for investors and traders alike. Gold is typically traded in the form of bullion, coins, or ingots. It is also possible to trade gold futures and options, though these products are less common. 

When trading gold, there are two main ways to do so: via the spot metal market, or through commodities exchanges. The spot metal market refers to the direct buying and selling of physical gold between two parties. This type of transaction is typically done over-the-counter (OTC), meaning that it is not subject to regulation by any central authority. Instead, OTC transactions are between private individuals or companies. 

The other way to trade gold online is through commodities exchanges. These are regulated markets where contracts for future delivery of gold are bought and sold. These contracts stipulate that a certain amount of gold will be delivered on a specific date at a set price. Commodities exchanges offer greater transparency and liquidity than the OTC market, but they also come with greater regulation and fees. 

How Does the Gold Market Work?

London is the key location for the over-the-counter (OTC) market, where market players deal directly with one another. While this market is less regulated and more flexible, the counter party risk is larger. Exchanges are regulated platforms with centralised trade. They often provide a standardised contract, which does not fit every trader because it restricts their freedom. Aside from London, the two other significant gold trade hubs are New York City and Shanghai. The COMEX exchange is in New York, whereas the Shanghai Gold Exchange is in Shanghai. 

How to Trade Gold as a Beginner? 

As a first step, you need to find a broker that will enable you to trade spot gold. Most forex brokers offer this service, but there are also specialist commodity brokers that focus solely on metals trading. Once you have found a suitable broker, the next step is to open a live trading account. 

You can choose to trade gold via CFDs (contracts for difference) or futures contracts. Both have their own advantages and disadvantages, so it’s important to weigh up your options before deciding which one is right for you. If you’re new to trading, it might be advisable to start out with CFDs as they tend to be less complex than futures contracts. 

Once you have chosen your instrument, the next step is to test your strategy on a demo account before risking any real money. This will allow you to get a feel for how the market moves and how your strategy works in practice. 

When you’re ready to start trading for real, the last step is to open your first position through an online gold trading platform. The most popular platforms are MetaTrader 4 and MetaTrader 5, and the ticker for gold is ‘XAU/USD’.

Different Methods of Trading Gold

In order to start online gold trading, it is essential to understand the different types of gold that are available. Gold can be traded in a variety of forms:  

CFDs (Contracts for Difference) are a type of financial derivative that allows investors to speculate on the price of an underlying asset without actually owning the asset. A CFD is essentially a contract between two parties, the buyer and the seller, where the buyer agrees to pay the seller the difference between the current price of the underlying asset and its price at contract expiration if the price of the underlying asset increases. If the price of the underlying asset decreases, then the seller pays the buyer. 

Gold futures are another way to trade gold without actually owning any physical gold. A gold future is a contract between two parties where one party agrees to buy gold at a set price on a specified date in the future. Like other futures contracts, gold futures can be used for speculation or hedging purposes. 

ETFs (Exchange Traded Funds) are investment vehicles that track an underlying index or basket of assets. Unlike traditional mutual funds, ETFs trade like stocks on an exchange and can be bought and sold throughout the day. Many ETFs offer exposure to gold by investing in gold-mining companies or holding physical gold bars. 

Bullion is gold that is in the form of bars or ingots. It is typically used by investors as a way to store wealth or as a hedge against inflation. Bullion can also be traded on commodities exchanges. 

Coins are another form of gold that can be traded. Gold coins are typically produced by governments and have a face value. They are often used as a form of currency or investment. 

Jewellery is another common form of gold. While it is not commonly traded, it can be melted down and sold for its gold content. Jewellery is also often used as collateral for loans or pawnbroking. 

Conclusion:  

Before trading gold, traders should know what makes this asset class unique, how it compares to other trading instruments (like stocks and bonds), and if it fits with their trading strategy. 

Once traders decide when they want to start trading gold, they should find the best product for them based on how they trade and what their trading strategy is. Some traders will benefit from the spot CFD product, which has lower spreads, while others will prefer the futures CFD product, which has a higher spread but no daily swap charges. 

After traders figure out which product fits them best, they should trade the asset to see how well their strategy works, ideally in a risk-free demo environment. Depending on how they trade, the volatility of gold could be too high or too low for them.