What is Gold Trading?
Gold has been seen as a ‘safe-haven,’ a store of value; it is not directly affected by government and central bank activities. The price of gold isn’t affected by monetary policies, inflation, and other factors that could render currencies weak in a short time – they do not affect the price of gold directly. In the gold retail market, the price is quoted against USD or EUR. Thus, XAUUSD or XAUEUR, and if USD or EUR gets weakened, it is normal for the price of gold to increase and vice-versa. It is also typical that the price of gold would increase when investors are demanding it heavily. Gold moved from $1455 to $2076 between March to August last year during the heat of coronavirus. Although the price of gold can be volatile in the short term, it has maintained its value in the long term.
When traders are not so interested in risking their money, they can buy gold and sell it when their risk appetite grows – this is to say that gold offers a great hedge against market inflation or deflation. Gold could be traded at any time even though it is more active at the New York session with higher volatility and volumes traded at that time. Some of the reasons to own gold include:
- It serves as a hedge against inflations.
- It protects against deflation.
- It retains its value even in times of geopolitical uncertainty.
- It helps to diversify one’s portfolio.
How Do Gold Brokers Work?
Gold trading markets are in different ways. The main gold market, the futures market, is located in the United States and London, and this market is traded round the clock. The majority of gold trading done in the market features spot contracts, with immediate settlement and the futures contract, which is a legally binding agreement to deliver gold at an agreed-upon price in the future. Investors mainly trade gold as spot and futures contracts, and they can trade these in the gold primary futures market: CME, CBOT, COMEX, and NYMEX. The margin requirement for gold exchanges at this level is very high, and they are not in the reach of retail traders.
Retail traders access gold through forex trading brokers, and these pair the gold against the USD, XAUUSD, or the Euro, XAUEUR. When gold is traded at this level, it is traded as a contract-for-difference instrument that does not involve the physical exchange of the assets.
Trading gold as retail traders will not come with the best experience when trading with a gold broker with bad services. The choice of a gold broker is crucial to your success as a trader. Some platforms do not have good trading conditions that should be of benefit to your trades. Many brokers are fraudulent, and they want to exploit the traders through slippages, requotes, hidden charges, or even not confirming withdrawals after making so much money. You should choose a broker that offers transparent pricing, an advanced platform, real-time price, risk management tools, and more professional tools to help your trading process.
It is common for brokers to offer multiple deposit and withdrawal methods, and this helps the clients to choose the easiest method for them. Aside from the ease of payment or withdrawal, it would help if you also considered the broker’s withdrawal speed. Do not register with a broker that takes more than 24 hours to deposit or, most importantly, release funds.
Best gold trading platforms
The section below mentions some brokers who offer gold trading services:
- XM – a broker that has proper customer support and fast payments methods, among other professional features
- Admiral Markets – The platform works properly on PC and mobile phones; it also provides a demo account to practice strategies, among other features.
- Exness – The broker offers instant automated withdrawals, trading tools to give the best trading experience, among other features.
- FXCM – It is a popular platform that is trusted by many and also provides the right trading tools for successful trading
- Forex.com – It offers very tight spreads for gold, improved MT5, among other professional features.
Do not go for a broker that is not regulated. A regulated broker is registered with the financial regulatory body of its country (For example, FCA in the UK), and the broker has to comply with the rules set by that body. On the other hand, unregulated brokers do not have such regulation and behave in any manner that they see fit. Regulated brokers also keep clients’ funds in segregated bank accounts and protect client’s data as much as possible.
Can Gold brokers be trusted?
Gold brokers can be trusted, but traders can not trust all brokers. They are good brokers as much as there are bad brokers. If you follow the guidelines given above, you will not make a mistake choosing a bad broker.