Discover the importance of the popular precious metal as a financial asset, and get tips on how to trade gold CFDs with IG.
CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
Gold CFD trading
Why is trading gold popular?
Gold has been the most highly desired of the world’s precious metals since ancient times, coveted for both its cultural and financial value. It was integral to valuation of the world’s currencies well into the 20th century, intrinsically linked to the price of the US dollar until the 1970s.
IG even took its original name – Investors’ Gold – from the metal, when in 1974 it was launched to offer clients the opportunity to trade gold on leverage rather than owning it outright. Trading gold is often popular as a form of insurance, as the metal is considered a safe haven in times of financial turbulence.
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Prices above are subject to our website terms and conditions. Prices are indicative only.
Why trade gold CFDs with IG?
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Free alerts
Set free alerts to know when the metal’s on the move
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Low spreads
Trade on some of the lowest gold spreads in the market
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Expert analysis
Inform your trading on gold with regular articles from our analysts
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Easy-to-use platform
Stay on top of your trades on gold CFDs with our best-ever web platform
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Educational resources
Become a better gold trader with our interactive IG Academy app
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Fast charting
Make your call on where gold's headed with our real-time charts
Five top tips for trading gold
1. Plan your trading
Gold tends to elicit a strong emotional reaction in traders, leading them to place far too much on a single trade or add to a losing position. Remove this from the equation and try to think of the commodity only in terms of price movements. Develop a trading plan with a set risk-reward ratio, and stick to it.
2. Analyse the market
Use charts to get an idea of how gold behaves over different timeframes. Backtest your strategies on historical data to see how they’d pan out. Look for patterns, wait for breakouts before trading, and trade with the trend. You can compare up to four different timeframes at once with the charts in the IG Trading platform, and get free trading signals to help you make your call.
3. Learn what moves gold
While gold tends not to be as affected by political and economic events as some other markets, it has its own price drivers that you’ll need to watch when trading. You can read about these below.
4. Trade mining stocks
Trading CFDs on the share price of companies that mine gold is a great way to gain indirect exposure to gold. Share prices can sometimes be good value compared to the gold price itself, and are obviously more affected by economic events and company announcements. Keep an eye on news and fundamentals to help inform your trades.
5. Consider a gold ETF
You can use a leveraged gold exchange-traded fund (ETF) to deliver amplified results against the metal’s price movements. For example, a double gold ETF will attempt to double any move that spot gold makes, and an inverse gold ETF offers another way of shorting the gold price. You can also use ETFs to gain exposure in more than just bullion price, with some funds including mining stocks in their ‘basket.’1
- Read our Best Gold Trading Strategies from IG Analyst
Factors that influence the price of gold
Gold demand
Gold’s price is likely to rise as demand for it increases. Since the 1970s the amount of gold bought annually has quadrupled, thanks to its cultural and financial value across the world, and application in diverse industries ranging from technology to jewellery.
The dollar
Gold and the US dollar have a complicated, but usually inverse, relationship. When the dollar falls, investors looking for an alternative store of value rush in to buy gold, driving up its price. A falling dollar also increases the value of other currencies, and that greater buying power also increases demand for gold that was previously unaffordable.
Central bank policy
Interest rates are another determinant that can influence gold price movements. Since the financial crisis of 2008, the inverse relationship between gold price and interest rates has been particularly strong. Periods of low or negative interest rates are especially positive for gold.
Financial stress and political crises
In periods of financial stress and/or political instability, gold is used as a safe-haven investment as it tends to retain its value. Given the considerable uncertainties facing the world economy since 2008, gold has become a popular investment vehicle.
Inflation
Inflation and interest rates are closely related – a sustained rise in general prices tends to lead to higher interest rates. Gold tends to perform strongly in high-inflation and deflation scenarios where there is a sharp rise in financial stress.
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Consumer demand
While demand varies from country to country, the uses for gold are consistent – jewellery, investing, technology and central bank requirements.
In 2013, the price of gold rose to $1416 toward the end of August, as Indian consumers bought over 617.4 tonnes of gold jewellery in preparation for the wedding season.
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Financial stress
The November 2016 presidential election created an uncertain environment for investors, and gold’s price surged as Donald Trump gained popularity – up as high as $1,366 per ounce.
Then after President Trump’s inauguration in January 2017, gold demand hit a two-month high.
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Inflation and interest rates
The European Central Bank cut eurozone interest rates to 0.0% and rates on its deposit facility to below 0% in March 2016, in the hope of encouraging borrowing and discouraging saving. The low rates available on cash caused many investors to turn to gold: its price went up more than 15% that year, hitting $1,279 per ounce.
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Gold production
So far, all the factors listed here will affect demand for gold – but its supply has implications too.
In 2016, gold production declined significantly for the first year since 2008, with many mining operations downsizing or shutting down completely. To find new gold supplies, scientists have begun developing technologies to detect previously unreachable gold sources, and even exploring the possibility of mining in outer space.
Gold as a safe haven
Gold is an asset that investors tend to rely heavily on in times of political or fiscal uncertainty. Unlike a currency, the amount of gold can’t be expanded at will, and unlike a stock, there’s no underlying company that can go out of business. As a result, the metal is often used as a hedging tool against inflation or currency devaluation.
However, when any investment becomes too popular there’s the risk of a price bubble being created, which could send prices spiralling when it bursts. For this reason, many gold traders choose to diversify into other markets.
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1 Please read the ETF's prospectus or Key Investor Information Document (KIID) before investing.
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CFDs are a leveraged product and can result in losses that exceed deposits. Trading CFDs may not be suitable for everyone, so please ensure you fully understand the risks and take care to manage your exposure.
