In this article, we will cover all the important information about gold trading in Australia, including a step-by-step guide on how to get started with trading gold.
So far, we have only extracted 20% of the earth's total gold deposit. Of this figure, 40% of global gold reserves remain in the hands of investors. To no surprise, gold continues to be one of the most expensive metals, and its demand in the trading arena is now at all-time highs.
In the eyes of a trader, gold is a unique financial instrument. It is highly liquid and a means to mitigate damage in times of challenging markets. It can be used as leverage and can serve as a hedge while ensuring competitive returns. By no accident, these factors have resulted in Australian traders turning to gold in their droves.
With seasoned traders looking to benefit from every potential market change, today, Australia's gold trading sector has a number of investment types and strategies. While some choose to speculate on the short-term value of this precious metal, others are keen to profit by taking a long-term buy and hold approach.
If this particular investment scene is something you are keen to explore further - this Australia Gold Trading Guide will tell you everything you need to know. Not only that, but we also talk about the pros and cons of trading gold and how to sign up with a gold trading platform today!
We cover the ins and outs of what gold trading is and what markets you’ll have access to, as well as the many strategies and systems that seasoned investors deploy.
- How Does Gold Trading in Australia Work?
- What Factors Determine the Cost of Gold?
- How to Measure the Cost of Gold?
- Gold Trading Hours in Australia
- How to Trade Gold in Australia
- How to Invest in Gold? Long-term Gold Trading in Australia Explained
- Why Should you Invest in Gold?
- How to Profit from Gold Trading Australia
- Risks of Gold Trading in Australia
- Best Gold Trading Strategies in Australia
- Gold Trading Australia Fees
- Gold Trading Australia - Best Tips for Beginners
- Four Steps to Start Trading Gold in Australia Today
- In Conclusion
How Does Gold Trading in Australia Work?
Gold trading is very much similar to any other investment scene - such as stocks or forex. Only in this case, you will be forecasting the future price of gold. In other words, gold trading will see you buy and sell the asset for long and/or short term financial returns.
Gold is a valuable asset to hold in times of instability, rising inflation, or even economic recessions. You might notice that gold investors popularly use the asset to hedge their portfolio against a volatile market.
Traditionally, the most common way to trade gold is to purchase it in its physical form. In the olden days, gold was traded via jewellery, bars and coins. Though these mechanisms are still utilized, nowadays, gold traders give an increasing preference to CFDs, ETFs, futures, and options.
These will allow you to trade the financial instrument without physically possessing it. Considering its value, gold investors often choose to trade this asset in the short-term, not least because it tends to perform exceptionally well with day and swing trading strategies.
This is primarily because, in the case of gold CFDs (Contract for Difference), you have the option to go both long and short. In one such day trading strategy, your position will stay open for a few hours or even less, depending on the day's forecast.
If you are a swing trader, you can hold the position open for weeks until you land a favourable price target. With investing now moving online in Australia, you can find gold trading opportunities on prominent ASIC-regulated platforms like eToro.
CFD Service. Your capital is at risk
Moreover, the aforementioned platform allows you to trade gold CFDs without paying any commissions. These contracts will also guarantee that they reflect the exact market value of gold - in real-time.
That said, it doesn't mean that gold assets do not fare well with long-term strategies. If you do want to invest over several months or even years, it might be better to stay clear of CFDs.
Instead, your best bet is to invest in a gold ETF. In doing so, your chosen provider will allow you to buy shares that are backed by physical gold bullion. The value of your ETF shares will rise and fall in-line with the real-time global price of gold.
If you are a novice in the trading department, do not let these unfamiliar terms overwhelm you. We will guide you through the entire process in a comprehensive manner, starting with how gold is valued.
What Factors Determine the Cost of Gold?
Gold, like any other commodity, is priced according to the supply and demand of the market in question. Australia is a major gold mining destination alongside the likes of South Africa, Russia, the United States, China, and Peru.
Since the amount of gold is finite, the supply in the market will always stay limited. However, as demand continues to be healthy, this results in a consistent price hike.
In the meantime, the stock markets are also heavily dictated by global politics and the state of the wider economy. If the stock market is witnessing a turmoil, it is highly likely that the value of gold will shoot up. On the other hand, a steady market could reflect a lower rate for gold.
Another factor that could play a role is currency depreciation. With a decrease in purchasing power that essentially translates to inflation, the cost of gold will typically rise.
As the currency in question is subjected to this loss and gold appreciates in value, the latter is highly preferred for hedging among investors. This leads to increasing demand and thus - an increase in the value of gold.
How to Measure the Cost of Gold?
Almost all financial assets are valued based on specific currencies. As such, you will see them priced in AUD, USD, or GBP. This system makes it easier for you to determine your asset's value in terms of your original investment. In regards to gold, however, there is more than one metric in consideration.
As we mentioned before, if you are trading with a tangible asset, it will usually be measured in weight. In most markets, it is by gram, ounces, or kilos. Otherwise, generally, the markets tend to price gold in terms of US dollars.
Given the USD makes up for 60% of all forex transactions facilitated by central banks, it is given preference over commodities. As such, the likes of gold, natural gas, and oil are all dominated in US dollars.
With that being said, this should have no impact on your ability to trade gold in Australia. This is because brokers like eToro allow you to deposit in AUD with an Australian debit/credit card, e-wallet, or bank transfer.
Then, your deposit will instantly be converted to USD - meaning that you can invest in and trade gold at the click of a button.
Gold Trading Hours in Australia
Gold - with the odd exception like cryptocurrencies, is one of the few financial markets that can be traded 24 hours per day, 5 days per week. This is because it is traded in each and every corner of the world.
For example, while most Australians will trade during Asian-Pacific hours, those in Europe will operate on a different timezone. Then you have traders in the US - which is where the vast bulk of volume comes from.
As a result, it doesn’t matter what time or day it is - you can trade gold in Australia wherever you see fit.
How to Trade Gold in Australia
With all the essential background information on gold covered, now we will begin to get into the practical aspects of trading. So that begs the question - how can you trade gold in Australia?
This is particularly crucial because there is more than one way, and the type of financial instrument you choose will impact your strategy and thereby your potential earnings.
Below we discuss the most customary ways to trade the short-term price of gold in Australia.
Trading Gold through CFDs
We have previously overviewed that CFDs are a popular means of trading assets in the short-term. Through CFDs, the instrument tracks the precise price movement of the respective asset. In short, if the market shows an increase in the price of gold by 0.51%, the CFD will mirror the same movement like-for-like.
And as such, CFDs are considered one of the best ways to trade gold. After all, they come with the lowest commissions and tightest spreads. Moreover, CFDs can also be traded with leverage, meaning you can trade with more than your current brokerage account balance.
And of course - an additional benefit of trading gold through CFDs is that you can ‘go short’. This means that you are speculating on the value of gold going down. As such, by placing a ‘sell order’, this will allow you to profit from falling gold markets.
Taking all of the above into account, let’s look at a simple example of gold CFD trading in Australia works in practice:
- You are trading through an online CFD broker, which quotes the price of gold at $1920 per ounce.
- You speculate that in the next few hours, the price of the gold will go down
- You proceed to place a sell order at a stake of AU$500
- As you predicted, the price of gold drops by 1.6%
- This means you made a profit of AU$8
Now, what if you had applied leverage here? As noted above, this means that you can trade gold with more money than you have in your trading account.
For example, if you applied leverage of 1:10 - this means that your profits are amplified by a factor of 10. As per the above, your $8 gold trading profit would have stood at $80 ($8 x leverage of 1:10).
On the one hand, applying leverage looks like an easy way to make money. However, it is important to remember that while leverage can boost your profit, it can also multifold your losses.
Consequently, trading via leveraged CFDs is always risky. As such, it is always recommended to carefully contemplate your investment decisions before making a move.
Gold Trading Leverage Caps in Australia
Crucially, Australia is one of the biggest markets for CFDs. As a result, the Australian Securities and Investments Commission (ASIC) is bringing more control over CFD trading with new legislation, subsequently imposing conditions on the amount of leverage that you can apply.
The new regulations will come into effect from 29 March 2021, which will issue a 1:20 limit on gold CFDs. In effect, for every AU$ 10 in your gold brokerage account, applying the maximum amount of leverage will give you AU$200 in trading capital.
CFD Service. Your capital is at risk
Trading Gold Through Forex Pairs
A forex pair is a price quote of the relative value of a single unit of a currency against another in the foreign exchange market. In this scenario, instead of two currencies, you will be pairing gold against another currency.
The majority of Australian trading platforms will offer a market for XAU/USD - with XAU being the ticker symbol for gold.
This is the trading method most preferred by traders to hedge against any instability in the market. Hedging gold against a forex currency will allow you to minimize the risks when there is an exaggerated change in market conditions.
Trading Gold Through Futures
Gold futures have the same working concept as that of CFDs, in the sense that you can go both long and short while applying leverage. That said, there are a few points that distinguish CFDs from gold futures.
- Futures always have a set expiry date for the trade to take place.
- The contracts usually are available for a duration of three months
- Once the contract expires, anyone holding it must buy or sell the assets at the initial strike price
In case you failed to unload the gold futures before its expiry date, you will need to settle it in cash. As such, gold futures are best left to seasoned Australian traders.
With that said, CFDs are much preferred anyway. Not only can you avoid the huge minimum investment threshold required to access gold futures, but CFDs never expire. This allows you to be a lot more flexible in how you deploy your gold trading strategy.
Trading Gold Through Options
A gold options contract is an agreement entered by two parties to facilitate a potential transaction at a preset price before a set expiration date. This is considered an advanced form of trading, more favourable for the experienced Australian traders.
To expand on the above, when you invest in options, you will not be required to pay the entire cost of the asset but only make a small deposit, tagged as the "premium".
Your gold options contract can result in two things. One, you assess the market, and if it does not go in your favour, you can choose to let the contract expire. On the other hand, with the market on your side, you can choose to buy or sell gold at the pre-agreed price.
If you anticipate the rate of gold to increase, you can choose a "call option". This will provide you with the right to buy gold at the specified price within the period of validity of the contract.
In case you are expecting the price to go down, it would be called a "put option". In either scenario, you are not obliged to carry out the trade. Here, as the name suggests, making the purchase is an "option".
Typically, you buy gold options expecting the price of gold to increase above the contract's exercise price. For those who don't know, the exercise, alternatively called the “strike price”, is the price at which the call or put option can be carried out.
Let us consider this example:
- According to your analysis, you estimate that the value of gold will increase in the coming weeks.
- You buy gold call options that expire in two months.
- The strike price is set at $1500. As such, you want the price to go above this amount.
- Your premium is at $100 for each contract.
- As you expected, the price of gold goes up in the next two weeks, up to $2000
- This will result in a profit of $500 on each of your options contracts.
- You also need to subtract the premium of the options contract. This means your net profit, in this case, will be $400 ($500-$100).
The same works for put options as well, if you speculate the price to go down.
On the contrary, in the above example, if you had purchased a call option and the price went down, you don't have to proceed with the trade at all. This means that your loss will be limited to the cost of the premium at $100.
This is one of the main reasons that options are a preferred method amongst gold traders in Australia. After all, not only can you enter a larger position by paying a small premium, but the most you can lose is the premium itself.
How to Invest in Gold? Long-term Gold Trading in Australia Explained
The means of trading explained above are best suited for short-term gold positions. This applies to futures as well, albeit, the name often gives the impression of a long-term trade. After all, these contracts only last for a maximum of 3 months in the marketplace.
That brings us to the question of long-term trading.
Typically, long-term trades are carried out by investing in “real” gold. Investors typically prefer to do this by investing in gold ETFs. These are passive investment instruments that are backed by gold assets.
However, you will not own the commodity. Instead, you will be holding small quantities of gold-related assets, thereby adding to your portfolio's diversity. You can engage in ETF trading via an ASIC regulated broker like eToro without needing to pay a single cent in commission.
Whenever the price of gold shows a variance, so will the value of the ETF. This stays in effect even though you do not possess the gold itself. As the entire process now occurs online, ETFs have become the most preferred option among traders looking for a long-term buy and hold strategy.
Apart from ETFs, there is one more option left to invest in gold in Australia - through gold mining companies. A few notable names in this field include VanEck Vectors Gold Miners, Barrick Gold, and Franco-Nevada. The Australian native BHP Billiton group is also an option worth considering.
Ultimately, online traders in Australia can easily invest in gold at the click of a button. Both ETFs and gold-related shares allow you to hold on to your investment for as long as you wish. But, it is important that you use a platform that does not charge monthly or annual fees. This is why we typically suggest eToro as our go-to Australian gold trading broker.
CFD Service. Your capital is at risk
Why Should you Invest in Gold?
Gold is certainly one of the most traded assets globally. But, is it the right instrument for your investment portfolio?
Here we have outlined some of the most significant advantages of you choosing to get into the Australian gold trading market.
Hedge Against Market Volatility
Every trader's first lesson is on the variance of markets and how it sways based on geopolitical events. Gold, though a financial asset like any other, stands apart in this one aspect.
Crucially, it is not highly influenced by a falling market; rather, the cost stays steady or even goes higher. This was evident in the 2008 global economic crisis, whereby investors turned to the precious metal as a means to hedge their positions.
This reason alone makes gold one of the safest assets with the ability to self-preserve during economic shutdowns.
Trade in Large Volumes
With the third-highest average, daily trading volumes of gold often surpass $140 billion. Being a coveted asset class, this significant trading activity also comes with other benefits - such as high liquidity levels and tight spreads. With the right strategy in place, trading gold can be both convenient and lucrative.
Liquid Asset Class
It is necessary to stress the importance of having liquid assets in your investment portfolio. Although you won't be literally owning gold bars - you can consider this asset class as super-liquid when trading it online. This means that you can cash in your investment whenever you see fit.
All of the methods of gold trading in Australia - ranging from forex pairs to ETFs, can be unloaded swiftly. Now, with the entire process carried out online, you can do it with a few finger taps.
The funds thus cashed will be instantly added to your online brokerage account. Then, you can use the funds to trade other assets or simply withdraw the money back to your Australian debit/credit card or bank account.
Engage in Both Long and Short Trades
If you anticipate an asset's price going down, your first instinct might be not to invest in it. But with CFDs, futures, or forex - you can also go short on gold. Meaning, you can short-sell gold to profit from falling markets.
This makes it possible for gold traders to benefit irrespective of how the asset is performing. Short-trades can be executed online if you find the right ASIC approved broker.
Option to Leverage
Gold, as you would expect, can be bought in a traditional market place only at its face value. This means you can invest only what you have in your account balance. But it is also possible to trade gold in Australia with leverage these days.
As we discussed earlier, Australia will soon implement a leverage limit of 1:20 on gold. Though it is limited, having the option to magnify your gains by 20 times is still a significant advantage.
CFD Service. Your capital is at risk
How to Profit from Gold Trading Australia
The underlying question for many newbie investors in Australia is how to make money through gold trading. The straight answer is that there is no secret recipe here.
For those new to trading, the lesson starts with the two fundamental concepts - buy or sell. In other words, you need to speculate correctly whether the price of gold will rise or fall.
As such, how much you profit from any trade will depend on how well you predict the market's movement. And of course - how much you stake and whether or not you apply leverage.
As helpful as it would be to have a system to foresee the future, as history has shown us, the price of gold is not under our control. Even with the strongest assumptions, you also have to be cautious with the amount you choose to risk.
That is, every decision you make can impact your potential profits, as well as the losses you take. Professional traders often work with targets on each position that they enter.
For example - aiming to make a certain amount in profit within a specific time. This could be for a week, a month, or longer. They might attain this through a combination of two or more trading strategies.
This means they also count for potential losses. At the end of the day, if you have made more winning trades than losing ones, you can call it profitable.
As we discussed earlier, the ultimate decision that you need to make on each gold trade is whether or to go long or short. However, the profits and losses that you make will also be determined by whether you choose to trade in the short run or invest over several months or years.
With this in mind, we have outlined a couple of examples to help clear the mist.
Short-Term Gold Trading Example
As evident from the title, short-term trades run for intervals ranging from a few minutes to a maximum of three months. Here is an example of a short-term position taken through a day trading strategy.
- Say you place a short-sell order on a gold CFD
- You stake a total of AU$500
- You decide to apply leverage of 1:10, bringing your total order size to AU$5,000
- The rate of gold falls by 2%
- Now your gold CFD position is worth at AU$10 more than you originally stake (AU$500 x 2%)
- However, you applied leverage of 1:10 - so your all-in profit amounts to AU$100 (AU$500 stake x AU$10)
While leveraging can lead you to effortless profits, there is also high risk involved here, as we have discussed earlier. In other words, your losses would also have been amplified by a factor of 10.
CFD Service. Your capital is at risk
Long-Term Gold Trading Example
Short-term trading is very fickle, demanding your complete attention throughout the day. It requires you to do considerable research and stay on top of the market continuously.
This also includes you being aware and fluent in reading and understanding technical analysis. If you are a trader with no such time on your hand, a long-term strategy might be more to your taste.
Here we have an example that will give you more information on how long-term gold trading in Australia works:
- You have AU$5000 to invest, and you opt for a gold ETF
- The value of your ETF will mirror the fluctuations of gold in the market
- Now let's say two years have passed
- The current gold value at the moment is 25% more than your initial investment
- On an original investment of AU$5000, the ETF position is now worth AU$6250
- You sell your ETF, resulting in a profit of $1250
- In doing so, you will find the funds automatically updated in your brokerage cash account balance.
- You can withdraw it or reinvest it as you prefer.
In this case, you do not have to be concerned with the short-term market variances of gold. You can wait for several months or years - depending on when the market turns in your favour.
Risks of Gold Trading in Australia
It is no news that trading, in many means, is not a safe and sound business. The same is relevant to gold as an asset class. Notwithstanding the previously discussed benefits - such as hedging and liquidity, there is always a certain risk tied to gold trading based on market assumptions.
Gold is a financial instrument that has little to no association with other assets. While it might make it suitable for hedging, there is also the threat that the market can be completely unpredictable.
As such, irrespective of the trend, the value of gold can move in either direction against your prediction. This translates to losing money, which can be further amplified if you have been trading with leverage.
Inexperienced traders have to be particularly careful in this regard. Whatever the asset is, there has to be sufficient research done before you make any moves.
An ideal place to start would be to learn about the gold markets. There are several tested and proven strategies that can and will limit your losses, such as calculating the risk-reward ratio and restraining your investment to 1% of your account balance.
Today, these tactics are much easier with access to dozens of trading tools available online - such as stop-loss orders.
You can also follow other traders and their marketing strategies to understand how they analyze the market and ultimately - how they interpret financial news and wider technical signals.
Best Gold Trading Strategies in Australia
The logic of profiting from a gold trade is simple; you make a profit when you correctly predict the future value of this precious metal accordingly.
However, and as we just discussed above, the trick lies in knowing what factors can affect the market and how to use it to your advantage. To make this more achievable, investors will devise a few strategies that are best suited for their financial goals and trading style.
To figure out whether a long-term or short-term strategy will work best for you, check out some of the popular gold trading strategies listed below.
Gold Swing Trading
Among short-term strategies, swing trading is deemed a common method to trade gold. Here, you might be taking slightly longer positions based on the current "swing" of the gold market, otherwise called trends. However, you are looking for wider market trends rather than swift movements.
For instance, let's say you have opened a gold trading position with a "buy order". The market shows an upward moment for gold, and it continues to rise.
A swing trader would wait until the upward trend reaches its sharpest point. When it appears gold will no longer stay in its upward trajectory, the trader will opt to place a "sell order".
Crucially, this means that the gold trader can keep their position open for days, weeks, or even months - staying with the current trend for as long as practically possible. This is why swing trading is also considered the most flexible approach to gold trading.
Gold Scalp Trading
While swing traders look out for slightly longer trends, scalping involves placing multiple trades of short holding periods. A trade could last as long as a few minutes to just a few seconds.
Consequently, the profit per trade will also be substantially small. As a result, scalp traders engage in numerous trades in a day to build their gains. At times, this could even go as high as hundreds of orders in a single day.
These traders are quick, and they do not follow any particular pattern or strategy. One moment they will be placing a buy order and follow it by going short, looking for diminutive opportunities.
The key here is to limit the market exposure to avoid risk, while at the same time exploiting tighter spreads. A slight change of direction in the price of gold is exactly what scalpers are looking for.
This type of trading also requires continuous watching of the market, therefore you need to devote yourself to trading and act rapidly. It is also worth noting that this gold trading strategy requires you to handle a fair amount of market emotion and thus - avoid making reckless decisions.
We have already touched upon the concept of day trading earlier in the Gold Trading Australia Guide. However, some people also confuse day trading with scalping.
The main difference is that day traders focus on the most profitable opportunities of the day and hold on to their position to maximize short-term gains. They could, for example, hold a position open for several hours to reach the desired target price level.
Unlike scalp traders, day trading in gold requires you to be somewhat patient. This is because the price target will be reached in less than order. But, equally, the trader might be forced to close the trade if it appears their original hypothesis no longer looks likely.
Trading Gold by Following the US Dollar
Gold is indeed a unique financial asset. However, it also has a few aspects that are common with major currencies. After all, gold was predominantly used as a form of money many, many years ago.
For regulatory purposes, the US dollar is set as the settlement currency for gold globally. This means you have to first understand what monetary factors influence the gold market, especially that of the US dollar.
Crucially, out of all the other elements that sway the price of gold, it is the value of the US dollar that can heavily shift the precious metal throughout the trading day. Other considerations, such as demand and supply, play less of a role in the short-term.
As a rule of thumb, the more the US dollar rises in value compared to other major currencies, the more the price of gold will decline. This is because gold will become less expensive when priced in another currency.
In some cases, when the price of gold increases, there will be fewer buyers in the market, leading to less demand. On the contrary, if the US dollar declines, then gold can appreciate as it is available at a more cost-effective price when utilizing other major currencies.
Another reason to track the US dollar is that XAU/USD can be traded around the clock throughout the week. This gold-backed forex pair is influenced by several factors - ranging from politics, GDP levels, terms of cross-border trading, interest rates, and more.
Ultimately, if you have an interest in trading, gold can play a crucial role in your attempt to hedge against falling markets. In other words, you can mitigate your investment risks by moving your capital to gold until the other markets become more steady.
Understand the Relationship Between Gold and the Economy
Gaining an understanding of the gold market is inevitable if you are entering this popular trading scene for the very first time.
At its core, the value of gold heavily relies on central banks and global monetary policies. In the wake of the financial crisis, the price of gold hit a peak of $1920.
However, the economy was not the only ingredient here. There were also geopolitical tensions that resulted in market variations. The reason why gold plays such a pivotal role is because of its ability to stand as a hedge to counteract inflation and any announcements concerning Quantitative Easing (QE).
QE is a monetary policy through which central banks invest in governmental assets in an effort to drive domestic economic activity. Considering that gold is valued using USD internationally, this means there is a direct link between the US Consumer Price Index and how gold is valued.
That is only one part of the recipe. The other is interest rates that have a relatively more indirect connection to gold prices. In general, like any other asset, higher rates make gold a less appealing financial instrument to investors.
In other words, rather than spending exponential money on gold, investors might choose to opt for generous interest rates offered by US Treasury bonds.
This means less money in gold, resulting in a drop of value. As such, one could say that interest rates and gold prices are directly proportional to each other.
Here, also note that we are talking about interest rates without factoring in inflation. Thus, those looking to trade in gold should also keep an eye on this.
Gold Trading Strategy Using Technical Analysis
Most of the factors we have discussed above fall under the “fundamental” analysis of gold. This means evaluating and interpreting real-world news surrounding the economy and geopolitical events.
With that said, we also have access to technical indicators that can help us conclude market movements based on historical data. You will be able to access such technical instruments through online trading and brokerage platforms.
To ensure accuracy here, you should conduct the same analysis for all gold-related securities. For instance, if you analyze the price of gold, perform the same analysis on mining stocks or ETFs to verify that they move in the same direction.
This will help you identify wider trends with more confidence.
For example, a “support level” is a point at which the gold market trend is likely to stop and take a U-turn. These high points are called pivot points. And by assessing the historical data, traders are able to assume the future movement of gold.
These support levels are considered the lowest points beyond which gold will not go down further. With technical analysis tools, you can now identify these support levels, which poses a window to buy gold.
While employing this strategy, you should also remember to place a stop-loss order below the support level as a precaution in case the value plunges beyond.
The support level is only one form of technical analysis. You could also factor in moving averages, measure the volatility of the trends using the Average True Range, and compare over/underbought conditions through the Relative Strength Index.
There are many more technical indicators available today for Australian gold traders to take advantage of.
Gold Trading Australia Fees
Trading, like all business activities, comes with expenses. When you trade gold online, you have to pay certain fees to your chosen broker for executing positions on your behalf.
Regardless of which strategy you choose or the broker you sign up with, you will have to pay an indirect fee called the “spread”. This, in a nutshell, is calculated as the variance between the buy and sell price of an asset.
Gold falls into an asset class with a considerably tight spread. It is fair to say that the spread will depend heavily on market variations, though. It is likely that with volatile conditions, the spread will tend to get wider.
In effect, you want to use a gold trading platform that is known for offering tight spreads. In doing so, this won't eat away your profits and thus - allow you to target smaller margins.
Gold Trading Commission
Trading commission is the standard fee that you pay your broker. Like the spread, this will also vary from one platform to another. While some impose a standard fee, others enforce commission as a percentage of the total volume of your gold trade.
You have to be acute about the commission, as it can easily take a hold on your potential gains.
Take a look at the example here:
- Suppose a trading platform charges you $10 in commission.
- You purchase two different mining stocks priced at $150 each.
- Here, you are placing two different trades, so your total commission is $20.
- Let's say, in two weeks, you decide to sell the same shares. This, yet again, will cost you $20.
- Meaning, your commission for these two trades will cost you $40 in total.
Now, there are also platforms that charge zero commission fees. Online brokers such as eToro enable all its customers to trade various gold markets and other assets at no commission cost.
Overnight Financing Fees
As implied, overnight fees are charged when a trade requires a position to be open overnight. If you are engaging in gold CFD trading, you need to be careful about your broker's overnight financing fees. It might be listed as a swap or a rollover fee.
This makes CFDs a poor choice for long-term investments as you might even end up with fees larger than your profit. In order to counter this, day traders often close a position before the overnight finance fee comes into force.
Deposit and Withdrawal Fees
In addition to the above trading fees, some brokers will also charge you transaction fees. Depending on how often you add and withdraw funds to and from your balance, this can easily add up to a hefty sum.
However, given the fierce competition among online brokers, you will have no trouble finding one that charges no deposit fees. On the other hand, withdrawal fees might be harder to avoid.
Gold Trading Australia - Best Tips for Beginners
If you call yourself a beginner in trading of any kind, you might want to take a step back and get a perspective on the whole process. Afterall, gold trading is not something you can afford to learn from trial and error.
Though it will not be possible to evade mistakes entirely, you should take your time to build your confidence and gather all the necessary information you can about the gold trading arena.
As such, here we give you an overview of a few useful gold trading tips that will ensure you do not enter the market blindly.
Begin with a Gold Trading Demo Account
A trading platform's interface will be entirely new to a beginner. So the first step is to make sure that you are familiar with how the platform in question works. The majority of gold trading platforms now give you access to demo accounts - allowing you to hone your skills before trading with real money.
In simple terms, a demo account enables you to engage in gold trading using paper money. This practice is crucial in knowing how to place orders, how to apply risk management tools, and how to understand the wider gold markets.
The best demo accounts out there will give you full access to their features, mimicking the conditions of a live and buzzing trading marketplace. Another perk here is that these demo accounts will also allow you to test out gold trading strategies before you deploy them in the real world.
Learn to Read Technical Analysis
In order to benefit from the tools available online, you first need to understand how to use them. Today, there are a lot of technical indicators that make the lives of traders easier. Invest time in studying these tools, how to refer, and infer data from them.
As a beginner, you should also consider the different aspects of risk management while trading gold online.
Sign up for Gold Trading Signals
Trading signals are becoming an increasingly common way for traders to stay on top of the market. These are more common in cryptocurrency and forex trading sectors, but you can also sign up for gold trading signals.
These signals will suggest what order you should place based on current market trends and movements. Reputable signal providers will also include stop-loss and take-profit orders to help you keep your risks to a minimum.
The main advantage of trading signals is that they let you take advantage of predictable future trends without needing to do any research yourself. This is also a highly beneficial tool for beginners, as it saves both time and effort from your side.
Copy Strategies of an Experienced Trader
There is nothing better than to learn from the masters themselves. Today, brokerage platforms like eToro allow you to copy their top traders.
For example, if your chosen trader enters a buy position on gold at a stake of 1%, the exact same trade will be mirrored on your account. This is another way to avoid doing research and merit from the tactics of experts in the field.
Smart Gold Trading with Bots
With automation taking over almost every industry, it makes sense that the trading sector has since followed suit. These trading bots will essentially execute the trades on your behalf. You only have to specify conditions such as stakes and maximum risk levels.
However, finding the right service provider is the key when looking for a gold trading bot. If possible, try out sites that offer demo accounts to mitigate your risk of being scammed.
In most cases, you will have to purchase the robot and install it into the third-party platform MT4. You then need to connect MT4 with your chosen broker. Not all ASIC brokers support MT4, so check this out before proceeding.
Four Steps to Start Trading Gold in Australia Today
Now that we have given you a comprehensive guide on how to trade gold in Australia, we will finish by guiding you through the signup process. If the world of trading has enticed you, you can sign up on a trading platform and begin trading in four easy steps.
In order to simplify this, we will refer to the process required at ASIC platform eToro. As you might have already noticed, we have used eToro throughout this gold trading guide to point out several aspects.
That is primarily because the platform is simple to use and beginner-friendly. The site also comes with a full access demo account loaded with $100,000 of paper money.
Furthermore, you will also benefit from commission-free trading and tight spreads on eToro’s various gold markets.
Here’s what you need to do:
Step 1: Create an Account
Your journey of trading begins by opening an account with a regulated online broker. At eToro, the process takes minutes. Simply head over to the platform’s homepage and click on the ‘Join Now’ button.
Apart from your email address, you will also need to provide personal information such as your full name, date of birth, and address while registering.
You will also be asked to upload a copy of your valid government ID and proof of address. But, if you are not planning to deposit more than $2,250 right now - you can complete this step at a later date.
CFD Service. Your capital is at risk
Step 2: Deposit Funds Into your Account
In order to place trades, you need to first add money to your account balance. The minimum deposit will vary from one broker to another. At eToro, this stands at just $200. The broker allows you to deposit via bank transfer, credit card, debit card, or third-party providers such as PayPal, Skrill, or Neteller.
Step 3: Choose a Gold Market to Trade
Depending on whether you want to trade long or short-term, you can choose between the different gold markets available at eToro. Like we discussed earlier, an ETF is more suited for a long-term strategy, while a CFD works well in the short-term.
Step 4: Place a Gold Trade Order
Once you have chosen your gold trading market, the final step is to set up an “order”. You can accomplish this by entering the following:
- Stake, the amount of money you want to invest in the trade
- Buy or sell order, based on your market assessment
- Leverage, if you are applying any
- Take- profit order, the price at which you want to close your gold trade if the position is in your favour
- Stop-loss, the price at which you wish to exit trade to limit losses
After confirming the order, your commission-free gold trade has been placed!
CFD Service. Your capital is at risk
Gold Trading Australia In Conclusion
The case for trading gold is apparent from this guide. The asset class is highly flexible and comes with several drivers, including liquidity and protection against economic uncertainties.
Be it short-term or long-term investments you are interested in, gold can bring you considerable profits with the right strategies. Having said that, all traders need to have an intimate knowledge of how the gold market functions and what can impact its movements.
By combining both fundamental and technical analysis, you can ensure that you stay ahead of the gold market at all times. It will, however, take some time before you know how gold analysis works.
Nevertheless, thanks to ASIC-regulated online platforms, now you can enter the gold trading sector and begin trading in minutes. The stand out platform for us is eToro - which allows you to trade gold on a 100% commission-free basis.
FAQs Gold Trading Australia
What are my options to trade gold in Australia?
There are different methods to trade gold based on your personal preferences. If you want a short-term plan, there are CFDs, options, and futures. If you want to hold on to your gold investment for a long time, an ETF is the better alternative.
Is it possible to trade gold in physical form?
Gold ETF trading is the best way to invest in tangible gold. These are backed by gold and also offer heaps of liquidity. The other option is to buy gold by weight from gold merchants, which you can store in a safe. However, this option is super inconvenient and fraught with risk.
Can I trade gold using leverage?
In Australia, according to ASIC rules which come into effect in March 2021, you can apply leverage of no more than 1:20 while trading gold. This means that you can amplify your stake by a factor of 20. Until then, some platforms offer Australians leverage of upto 1:200 when trading gold online.
How can I practice trading gold?
Some online platforms give you access to demo accounts where you can practice gold trading using paper money. This allows you to understand the trading scene without involving any risks. eToro, for example, offers demo accounts that come with a pre-loaded balance of $100,000.
What is the minimum deposit required to trade gold?
The amount you invest in gold trade depends on the type of market and the brokerage site. It can range from $50 and above on most platforms.