Gold price rises, spot spreads widen

The gold price has experienced increased volatility in recent weeks on the back of the ongoing coronavirus pandemic. Here, we go through gold’s recent price movements and explain why spot spreads are widening.

Why has gold’s price risen?

The price of gold has experienced a rally in the last week as coronavirus cases continue to rise around the world. Investors and traders alike have sought to capitalise on gold’s safe-haven status, with many looking to buy up more of the precious metal to protect their capital.

However, the increased demand has been met with restricted supply. This is because a number of gold refineries have been forced to shut for at least a month, or until the virus is under control.

Given the current lack of supply of physical gold bars, many market participants are turning to gold futures to get exposure to gold’s price. This is because gold futures enable an individual to agree a price in the present, to be settled at a later date.

Why are spot gold spreads currently so wide?

Wider spreads in the spot gold market are the result of lower liquidity and increased volatility. Spreads – the difference between the bid and ask prices – are not fixed, but fluctuate and widen naturally as volatility increases. IG is constantly working to keep our spreads as low as possible, and they’re often lower than the spreads available in the underlying market.

As a result of widening spot spreads, many traders and investors might want to turn to gold futures as volatility continues, which currently have tighter spreads than spot gold. You can take a position on gold futures with CFDs, which enable you to speculate on the gold price rising, as well as falling.

To trade gold futures with IG, follow the steps below:

  1. Create or log in to your IG account
  2. Carry out your own fundamental and technical analysis
  3. Decide whether to go long or short
  4. Take steps to manage your risk
  5. Open and monitor your position

Gold price technical analysis

By Chris Beauchamp, Chief Market Analyst

Over the last week, the price of gold has hit a multi-session high, rising from $1460 to $1640. If the pullback currently in progress from here establishes a higher low, it could provide a buying opportunity.

Get more technical analysis from Chris Beauchamp


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