If anyone regularly trades the gold market they will know that any Dollar negative news often translates into support for higher gold prices. This is not a surprise when the key gold market is traded in US Dollars per Troy Ounce.
So even without supply and demand affecting the price of gold, the market can swing purely on Dollar exchange rates, for example:
The prospect of low interest rates in the US makes gold a little more attractive. Note that low interest rates tends to make a currency weaker compared to currencies where the interest rates are higher.
China’s reserves contain hundreds of billions of US Dollars. Every now and again China will release Dollar negative rhetoric suggesting that they will sell some of their huge Dollar reserves. That naturally reduces the price of the Dollar and again supports the price of gold.
The question is, what should you do if you want to explore the gold market a little further?
Perhaps you are interested in making some small trades. Although note that the word ‘small’ is relative. Even with the gold spreads we are about to discuss you would need to deposit 100-200 Euros / Pounds / Dollars before trading.
One of the most convenient forms of trading gold is via ‘Financial Spread Trading’. The number of trading opportunities, easy access to world markets and the speed at which you can trade make it an option worth considering as part of your investment strategy.
Of course, any investment provides opportunity for making a loss. Share trading, buying a house and exchange traded funds can all lead to losses. With spread trading, these losses can be larger than your initial stake.
Having said that, spread trading does solve a lot of problems when it comes to tax, simplicity and range of options. There are some useful benefits.
Being able to 'short' a market provides interesting opportunities. You do not have to speculate on markets to go up. If your research suggests that the price of gold will go down you can speculate on it to go down. If your research indicates that the gold market will go up then you can spread bet on it to go up.
Spread trading profits don’t incur capital gains tax*.
Investors who speculate on stocks and shares in the traditional manner generally incur commission charges and/or broker's fees. With financial spread bets there are no such fees.
Before trading though, ensure that spread trading matches your investment objectives. Spread bets carry a high level of risk to your capital. Familiarise yourself with the risks involved. Seek independent advice if necessary.
So where to trade? The Financial Services Authority regulates the spread betting firms based in the UK.
Also, a number of spread betting firms offer the usual benefits of letting you trade outside market hours. Some offer trades on thousands of global markets. Some companies, like Financial Spreads, will also let you trade markets such as Gold, FTSE 100, DAX 30 and Crude Oil from Sunday evening all the way through to Friday evening. Genuine 24 hour trading.
For more details on the various companies and the markets that they offer, see: spread betting companies.
Metals spread betting markets may also be available through other companies. Notes.
With spread bets you can lose more than you initially invested. Ensure that spread betting matches your investment objectives. Spread betting does carry a high level of risk to your capital. Familiarise yourself with the risks that are involved. If necessary, seek independent advice.
Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.
'Gold Trading', Guide by D. Jones, last update: 9-Apr-10
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Risk Warning - Spread betting carries a high level of risk to your capital & you may lose more than your initial investment. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved, seek financial advice where necessary & make sure spread betting meets your investment objectives.
The above information is correct at time of writing. The spreads quoted are for Rolling Daily markets and may vary out of hours. † Tax Law can change.
FinancialSpreads.com is a trading name of London Capital Group Ltd which is authorised & regulated by the Financial Services Authority (FSA). Registered address: is 4th Floor, 12 Appold Street, London EC2A 2AW. All information correct at time of publication.
Risk Warning:
Spread Betting carries a high level of risk
to your capital and you can lose more than your initial investment,
it may not be suitable for all investors. Ensure you only
speculate with money that you can afford to lose and that you fully
understand the risks involved and seek independent financial advice where necessary.
Disclaimer:
Online-Spread-Betting.com does not endorse the information and
analysis available on this site. It is provided purely for information
purposes and is delivered as a personal view of the writer. Under no circumstances
is the information hereon to be used or considered as, an offer to sell, or a
solicitation of any offer to buy. The website content does not constitute investment
advice and neither the individual contributor nor Online-Spread-Betting.com accepts any
responsibility for any use that may be made of the content.
* Tax Free Trading:
Tax law is subject to change. It may also differ if you pay tax in a jurisdiction outside the UK.
