int
Course overview
1. What is gold trading?2. How does gold trading work?3. How do leverage and margin work? - gold4. Using risk management in gold trading5. Conclusion2. How does gold trading work?
The gold ticker symbol is XAU. The letter "X" stands for "Index," whereas the letter "AU" stands for "Aurum," the Latin word for gold.
Using a ticker simplifies product searches on the MetaTrader trading platform.
The most popular currencies to trade against gold CFDs are the USD, AUD, CHF, EUR, and GBP. The symbol for a gold trade against the US dollar is ‘XAUUSD’, while the symbol for trading gold futures CFDs is ‘GOLD.fs’
Bullion spot CFDs are priced using the underlying spot market, whereas futures CFDs are priced using futures contracts.
Gold CFDs: A CFD allows you to trade the real-time price movement of gold without purchasing physical gold. Because CFDs are leveraged products, you only need a modest investment to have full exposure to the underlying trade. It is important to note that the profit or loss is determined based on the whole size of the trade position, so profits and losses are amplified.
Gold futures: If you anticipate that the price of gold will rise in the future, you can enter a contract with a seller and agree on a fair price to be paid today. When the actual gold is delivered at the end of the contract, you can sell it for more at a profit.
Read more in Axi’s Gold trading guide.
Example
Example of trading gold as a physical asset
You contact a gold dealer or a reputable online platform to purchase gold bullion. You decide to buy 10 ounces of gold at the current market price of $1,800 per ounce, totaling $18,000.
After purchasing the gold, you need to decide how to store it securely. You may choose to store it in a bank's safe deposit box, a secure vaulting service, or in a personal safe at home.
You keep an eye on gold prices. If you decide to sell your gold when the price reaches $1,850 per ounce, your profit would be ($1,850 - $1,800) * 10 = $500.
Example
Example of trading gold as a CFD
Let's say you believe that the price of gold is going to increase in the near future. You decide to trade gold using a CFD through a broker.
With CFD trading, you can trade with leverage. If your broker offers leverage of 20:1 for gold CFDs, this means for every dollar you deposit as margin, you can control $20 worth of gold. In this example, your $900 margin allows you to control a position worth $18,000.
As the price of gold moves, the value of your position will change accordinglyWith CFD trading, you can trade with leverage. If your broker offers leverage of 20:1 for gold CFDs, this means for every dollar you deposit as margin, you can control $20 worth of gold. In this example, your $900 margin allows you to control a position worth $18,000. If the price of gold rises to $1,850 per ounce, your profit would be ($1,850 - $1,800) * 10 = $500.
Quiz
1/1