Gold Trading: How to Trade Gold

Last Updated July 23rd 2021
10 Min Read

How to Start Gold Trading

Gold Trading is a brilliant investment option. Trading gold can be a real gold mine – it can help you secure your capital, diversify your portfolio, and increase your wealth. 

Even if you are new to the world of trading, we at Trading Education can help you become a pro. Simply sign up for one of our online courses to understand the complexities of trading and establish a profitable trading strategy and healthy financial habits.

The History of Trading Gold

If you are wondering why and how you should invest in gold, then remember that the history of trading gold is more than fascinating. This rare yellow metal is valued for its beauty and is often considered a symbol of glamour and wealth across the world. Interestingly enough, pieces of natural gold were found in Spanish caves dating back to 40,000 BC, while the oldest processed gold was found in Bulgaria dating back to 4,600-4,100 BC.

That being said, the earliest conquests for gold started in Ancient Egypt around 3,600 BC. The ancient Greeks also invested a lot of resources in mining gold, and in 560 BC the first gold coins were introduced in the state of Lydia, today’s Turkey. The Romans expanded on the Greek mining technology using the resources of the Roman Empire and introduced the Ducat - one of the most popular coins in the world ever.

The reason why gold coins became popular in trading is the fact that unlike other livestock and commodities, coins are easy to carry and exchange. No surprise that gold mining boomed in the modern world, with the 1848 California gold rush being a clear example of people’s fascination with gold.

Gold as a Safe Haven in the World of Trading

ways to trade gold

Gold is valued not only for its commercial and industrial properties but as a safe haven in trading. This yellow metal is often seen as a safe-haven investment option in times of uncertainties.

We should note that it was in 1944 when the Bretton-Woods Agreement was signed, or when countries decided to fix their currencies to the US dollar, which was pegged to gold. In 1971, the Bretton-Woods Agreement was abandoned - simply because there wasn’t enough gold anymore! Soon after that, the first gold futures contracts were traded.

Now, the finite supply of gold makes this metal even more attractive. According to data, gold has increased its value significantly since 2001, and central banks keep accumulating more and more gold in their reserves. As of 2019, the US, Germany, Italy, Japan, Russia, and Switzerland are some of the countries with the largest amounts of gold.

Trading Gold Today: 9 Trading Options to Consider

Gold is one of the most desired and traded metals, with almost 200,000 tonnes being mined throughout history and used in jewellery, investment, and technology. Nowadays traders can easily Trade gold online. 

Below we present nine options to trade gold:

1. Trading Gold Bullion

Trading gold bullion is a popular form of investment and direct gold ownership. Note that gold bullion is physical gold of high purity (for example, in the form of rectangular bars). When it comes to large gold bars, we should note gold bullion may become illiquid. After all, you can’t just chop off a bit of the bar and trade it!

At the same time, they are issued by official institutions (with serial numbers for safety issues) and are ideal if you want to trade gold at a high volume. Trading gold bullion is like sitting on a goldmine – quite literally!   

2. Trading Gold Coins

Gold coins have always been essential assets in the world of trading. Gold coins can be easily bought by traders from reputable dealers. Because of their smaller sizes compared to gold bars, they are a convenient way to buy and sell gold. Some of the most popular circulated coins include the South African krugerrand and the Canadian maple leaf. 

We should note there are also rare gold coins with numismatic value and aesthetic rarity, which attracts collectors and are traded above the spot price of the yellow metal.

3. Trading Gold Futures, Options, and Swaps

There are many ways to trade gold. Take futures, for example! Futures are defined as leveraged instruments to trade gold at a fixed price on a certain date in the future. Experts claim that futures are used mainly for speculation and hedging. We should note that this investment can be risky and is used by experienced traders who want to invest large sums. 

Options are an alternative to futures and also allow traders to sell and buy gold. Note that options give the right but not the obligation to trade assets. 

Just as importantly, traders can consider gold swaps – defined as specific contracts traded over-the-counter.

4. Trading Gold Exchange-Traded Funds (ETFs) & Mutual Funds

If you believe that the streets of trading are paved with gold, then consider trading gold ETFs. Gold ETFs allow traders to trade gold and other commodities without purchasing the actual asset. This investment option is ideal for small traders as it requires minimum capital and can be traded like stocks over a long period of time. 

On top of that, many gold-backed mutual funds trade gold along with other commodities, which is a great and safe way to diversify your portfolio.

5. Trading Contracts for Difference (CFDs)

Trading CFDs is another popular way to invest in gold and boost your short-term strategy to trading success. Users can actually go long or short and hold trades as long as they wish. On top of that, CFDs allow traders to speculate on the price of an asset, which can be beneficial. 

That said, CFDs use leverage, which can increase your wins... but also magnify your losses. Always invest in improving your risk management strategy!

6. XAU/USD Forex Trading

Trading forex, defined as the largest financial market in the world, can be your golden ticket to success! In forex, gold is considered a currency. 

One of the most common gold instruments to trade on is XAU/USD (gold priced against the US dollar). Let’s not forget that an increase in the price of the US dollar can lead to a decrease in the price of gold.

7. Trading Gold Mining Stocks

Investing in gold mining companies is another way to invest your money and profit from gold. We should note, however, that investors will be investing in a business, not gold itself. Thus, researching individual companies is detrimental to success. 

The good news is that some companies mine more than just gold, so you can easily diversify your portfolio by trading mining stocks and shares.

8. Trading Gold Certificates

If you want to strike gold, consider trading gold certificates as well. We should mention that gold certificates show ownership of a certain amount of gold (in ounces). They are issued by banks to show one’s ownership. 

Note that this investment can be risky, though; if the company storing your gold goes down, your gold certificate will be worth nothing.

9. Trading Gold Jewellery

Finally, let’s talk about how to trade gold jewellery. Trading gold jewellery is one of the most enjoyable ways to own gold and pass it down from one generation to the next. Let’s admit it - gold jewellery is simply glamorous. No surprise that, according to data, around 49% of gold is used for jewellery. 

Yet, unless you are a jewellery maker, trading jewellery requires a lot of time to find good deals at auctions in order to increase your wealth.

Why Should I Trade Gold?

Given that gold is a valuable asset, it’s no surprise that many people across the globe invest in gold. Note that the price of gold increases in times of economic uncertainty, so investing in gold amid the ongoing pandemic can be a golden opportunity. In fact, data shows that in the past months, the price of gold has increased by over 20%.

One of the main reasons to trade gold is to preserve and increase your capital. Trading gold can be seen as a defence against inflation, uncertainty, and currency devaluation. On top of that, certain gold assets are highly liquid as one can easily convert them to cash.

Another reason to trade gold is to diversify your portfolio. Trading the gold-silver ratio (defined as the amount of silver required to buy gold), for instance, is highly popular in trading.

How Can I Trade Gold?

While the advantages of trading gold are clear, one has to learn how to trade successfully, either part- or full-time. 

Here are some stellar ideas to help you become a successful gold trader:

  • Before you start trading gold, you should invest enough time and resources in understanding the complexities of trading. Consider one of our online courses that can guide you on your learning journey to trading success.
  • If you want to trade gold, you should decide if you want to own actual gold. If so, consider storage fees and safety options.
  • If you prefer other investment options, assess their risks and potentials. Remember that all that glitters is not gold, so never trade assets you can’t afford to lose.
  • Be mindful of regulations and taxation. To provide an example, the Markets in Financial Instruments Directive is the regulatory body that deals with commodity trading in the EU.
  • After you get started, it’s time to create a trading strategy and style. Invest enough time in either fundamental or technical analysis.
  • Always keep track of different factors, such as volume charts, supply and demand, market volatility, geopolitical events, and central bank actions. For example, in times of rising interest rates, figures show that investors tend to trade currencies, stocks, or bonds, instead of gold. After all, gold doesn’t produce cash flow itself.
  • Keep yourself informed 24/7; follow news updates, blogs, and networks to understand when to trade gold. Interestingly, experts claim that the demand for gold in China and India is worth keeping track of as gold jewellery is considered a long-term investment option there.
  • Know your trading times. Note that the CME Globex exchange is closed between 4 pm and 5 pm U.S. central time, including weekends.
  • Learn how to control your emotions while trading because intense emotions can lead to failure. There’s no place for greed, impulsiveness, and fear in trading.

How to trade gold - In Just 3 Steps

1. Open an account with eToro.

Choose between a live account to get started straight away or practise with virtual funds on demo account.

2. Deposit funds into your account.

You will now be asked to make a deposit. Supported payment methods include:

  • Debit Card
  • Credit Card
  • Bank Transfer
  • Paypal
  • Skrill
  • Neteller

You’ll need to meet a minimum deposit of $200. Please Remember that trading gold CFDs are leveraged products, so you will only need to deposit a small percentage of the overall value of the trade. 

3. Start Trading Gold

If you are ready to place your first order in the market, log in to the eToro trading dashboard, then enter Gold into the search box at the top of the page.

eToro – Best Gold Trading Platform

eToro have proven themselves trustworthy within the industry over many years – we recommend you try them out.

75% of retail investor accounts lose money when trading CFDs with this provider.

Trading Gold: In a Nutshell

  • Gold is one of the most valued and glamorous metals across the world.
  • Trading gold is a golden opportunity to secure your capital and diversify your portfolio.
  • There are various ways to trade gold. From buying actual gold jewellery and bars to trading futures and gold mining stocks, traders have different options to choose from.
  • As gold is seen as a safe haven, investing in gold in times of uncertainties can be lucrative. Therefore, the year 2021 can be a golden age for gold trading.
  • To become a successful trader, one should invest enough time in trading education, developing a successful strategy, and creating a successful financial mindset.

Would you consider trading gold? What trading option would you choose?

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