Online Gold Trading: A Guide on How to Trade Gold

Brandie E Blackler
20 Min read

In your experience trading on the markets, how much do you know about online gold trading?

Trading gold dates back as far as the Roman Empire, when it was used as a currency. Now, in our modern world, many are online gold trading and learning how to trade gold online with various brokers. 

Gold is primarily used for jewellery production – as well as a vehicle for investment with individuals able to buy and sell gold online at the click of a button. 

In this article, we will cover the basics of online gold trading, what influences its price, how to trade gold online with Admirals and more. 

Online Gold Trading: The History of Gold

Gold is a commodity that has been highly sought after by the human race for centuries.  

Whilst the precious metal is used in commercial and industrial activities, such as in jewellery and mobile phones, it is also heavily speculated on by traders, hedge funds and central banks. 

However, the 'yellow metal' tends to attract most people during times of economic uncertainty when online gold trading increases.  

In fact, during these times of economic turmoil, the price of gold tends to increase as investors flock to this proclaimed safe-haven asset

Gold's status as a safe haven asset dates back to the 1944 Bretton-Woods Agreement. As the US Federal Reserve was required to hold gold that was equal to 40% of the value of the US dollar, the bank accumulated nearly 75% of the world's gold. For this reason, the majority of developed countries agreed to fix their currencies against the US dollar hence why the dollar is the world's global currency.

According to the World Gold Council, by the end of Quarter 4 (Q4) 2021, Western Europe holds the highest amount of gold reserves, with a total of 11,777.47 tonnes (the majority being in Germany). 

This has changed from 2020, when the United States had the world's highest official amount of gold at around 8,133.5 tonnes, followed by Germany, Italy, France and Russia.

See below a Monthly chart displaying the GOLD vs USD CFD chart from Admirals MetaTrader 5 WebTrader, showing the steady increase and price fluctuations from 2013 up until now, in 2022:

Depicted: Admirals MetaTrader 5 - Gold vs USD CFD Monthly Chart. Date Range: 1 July 2013 - 1 March 2022. Date Captured: 21 March 2022. Past performance is not necessarily an indication of future performance.

How to Trade Gold Online

1. Gold Stocks

The most common form of online gold trading is to do so indirectly by buying gold mining stocks.

Online gold trading in this manner means that you do not need to worry about storing the physical commodity in your property or elsewhere. However, bear in mind that each method comes with its own pros and cons.

Advantages and Disadvantages

  • When the price of gold increases, companies involved in the gold trade naturally benefit from increased sales, meaning that their share value tends to be positively correlated with gold prices.
  • The downside of buying gold mining stocks is that not all of them are capable of outperforming, or even matching, the price of the precious metal.

2. Gold ETFs

Gold Exchange-Traded Funds (ETFs) are another way of indirectly investing in gold. 

An ETF is a publicly listed fund that is designed to track the movement in the price of an underlying asset, index or basket of stocks.

Each gold ETF varies in how they track the value of this asset; they may invest heavily in the physical asset, hold shares in companies related to the industry, trade derivative instruments such as futures and options (which we will look at next) or do a mixture of these things.

Advantages and Disadvantages

  • A benefit of investing in gold ETFs is that it can provide instant diversification across a number of different instruments.
  • Moreover, it is possible to purchase precious metal ETFs that not only allow investing in gold, but other precious metals such as silver.
  • However, it should be noted that buying and selling ETFs will most likely incur a commission, whilst holding one will incur a small management fee.
  • Some gold ETFs suffer from illiquidity, which impacts the ability to buy and sell them

3. Gold Futures

A futures contract is an agreement by one party to buy, or take delivery of, and another party to sell, a commodity like gold at a fixed date in the future.

The first futures contract was written in 1851 for corn and was offered through the Chicago Board of Trade (CBOT) exchange.

Nowadays, trading gold futures contracts can be done through the Chicago Mercantile Exchange.

Advantages and Disadvantages

  • With Gold Futures, you can trade almost 24 hours a day (during the trading week), while you may also be able to trade with higher leverage.
  • Futures contracts expire on certain dates which can be difficult if a trader wants to hold a long-term position.
  • Trading futures contracts also require a large sum of capital as the contract sizes tend to be quite large.

For example on our last point, gold trades in a size of 100 ounces per contract with every one-point move the equivalent of $100. This means just buying one gold futures contracts (the lowest you can on the exchange) means a ten-dollar move is equivalent to a $1,000 loss.

4. Gold Options

A gold options contract grants the buyer the right but not the obligation to buy or sell the underlying asset at a set price before or on a certain date in the future.

Advantages and Disadvantages

  • With Gold Options, or Options in general, you can profit from either price direction, as well as if the price stays the same without fluctuating.
  • Gold options trading contracts expire and their value changes depending on the volatility of the asset price and how close it is to expiring.
  • When investing in gold with options, users must have a minimum of $2,000 in their account, with a minimum $25,000 if day trading options, which is quite large for many traders.

5. Gold CFDs

Contracts For Difference (CFDs) allow traders to speculate on the price of an underlying asset, such as gold, and potentially profit from both rising and falling prices by going either long or short.

Advantages and Disadvantages

  • Trading gold CFDs means that the trader is never required to take ownership of the physical asset.
  • Moreover, CFDs benefit from the use of leverage, which allows traders to access larger positions in the market with a smaller deposit.
  • CFDs also allow traders to hold a position for as long as they want, whether this is for minutes, days, weeks or months.
  • However, it should be noted that CFDs are subject to swap fees, which is interest charged on a position held overnight.

If you've yet to register with Admirals, do so by signing up for a free-access demo account, below:

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How Can I Start Online Gold Trading?

If you're interested in online gold trading and want to learn more on how to trade gold online, this is where it gets interesting.

We will provide some gold trading tips in the following section. The key to setting you on your way towards successful trading is to ensure you have the right trading tools and products to trade properly.

As you can see below in the Gold Linear Perpetual Futures Contract (PHEMEX) live TradingView chart, there are plenty of price movements worth paying attention to:

 

1. Choose the Right Broker

For most people, investing in gold bars or gold bullion coins and storing them under the bed is just not practical or safe. However, as we have seen, there are other options out there for traders and investors, such as gold CFDs. By trading CFDs, the trader never owns any physical gold which means there are no issues in storage or security.

The most common gold CFD instrument to trade on is XAUUSD (whose symbol is just "GOLD"), which is gold priced against US dollars.

With Admirals, users can speculate on the price of gold, as well as on other related markets such as XAUAUD which is gold priced against the Australian dollar. Admirals offer traders the ability to trade with a broker that offers the highest regulation, security and safety possible. Other benefits include:

  • Trade and invest with a broker regulated by the UK's Financial Conduct Authority, the Australian Securities and Investments Commission, and Estonian Financial Supervisory Authority and Cyprus Securities and Exchange Commission.
  • Open multiple types of accounts such as a CFD (Contract for Difference) trading account to go long and short and potentially profit from rising and falling markets. Furthermore, access leverage of up to 1:500 for Professional clients and up to 1:30 for Retail clients. This means you can control a larger position with a smaller deposit.
  • Access the fastest and most secure trading platform in the world, MetaTrader, for Web, Windows, Mac, iOS and Android operating systems so you can trade on the go.
  • Trade and invest in multiple asset classes such as gold, indices, currencies, global shares and cryptocurrencies.

If you're interested to start online gold trading today, you can do so by registering a live account with Admirals by clicking the banner below:

Open a Live Account

Trade the Live Markets and Trade Efficiently

 

2. Know Your Trading Hours

When choosing the best trading hours, traders are trying to find the times when the price of gold is more likely to move in a directional manner. This largely depends on the demand for gold at a specific point in time. We will explore the factors that affect the demand for gold further down the article.

However, you may be interested to know that with Admirals you can trade and invest in gold nearly 24 hours a day, between 01:00 - 23:59 (Eastern European Time) Monday to Friday. Typically, the trading hours that offer the most movement can be found in the US trading session, which is between 16:30 - 23:00 (Eastern European Time) Monday to Friday.

This is when the US stock market opens, which opens up the trading activity on other trading products such as gold options trading and trading gold futures, which are both discussed further down the article.

This increased activity can be confirmed by looking at the Average True Range (ATR) indicator of the intraday price of gold. The ATR indicator averages the high and low range of a specific time period like a 1-hour chart, over a user-defined number of hours.

For example, the chart below shows the 1-hour chart of the price of gold with an ATR (8) - effectively measuring the average range of the last eight hourly time periods:

Depicted: Admirals MetaTrader 5 - Gold H1 Chart. Date Range: 15 March 2022 - 21 March 2022. Date Captured: 21 March 2022. Past performance is not necessarily an indication of future performance.

You may notice the ATR (8) indicator tends to move higher towards the middle or latter part of the day, which represents the US trading session.

This level of analysis primarily helps those day trading gold. Ultimately, the trading hours that you choose will depend on what type of trading strategy you will be using.

3. Use a Trading Strategy

A trading strategy helps traders to analyse the price of gold for any clues on where the market could move next. As there are so many ways to analyse a market, having a list of rules is essential in being disciplined consistently over a period of time. Some of the many ways to analyse the price of gold include:

  • Fundamental Analysis. This is the study of economic data and sentiment regarding the gold market. For example, in times of economic uncertainty gold prices tend to rise due to its status as a safe-haven asset. Advanced traders will attempt to analyse changing world economics to try and position themselves early on in a potential move higher in the price of gold.

 

  • Technical Analysis. This is the study of price to identify possible entry and exit levels. The study of price generally comes down to using chart patterns, price action and technical trading indicators. This will be demonstrated in more detail in the trading strategy section further down the article.

As we move on to explore the factors that affect the price of gold and how to trade it with Admirals using a simple trading strategy, it may be useful to open your Admirals trading platform to follow through on the trading examples on the price of gold in the next section.

Trade With the MetaTrader 5 Trading Platform

If you haven't yet downloaded your trading platform you can download MetaTrader 5 completely free with Admirals. You will also get access to a host of other benefits such as the ability to trade on other commodity markets, currencies, indices or shares, as well as access to a wide variety of free technical trading indicators. Click the banner below to get started today:

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What Affects the Price of Gold?

There are many different factors that influence the price of gold, which should be considered when online gold trading. Many of these factors can change over time, however, some of the major influences include:

  • Geopolitical Uncertainty
    • During times of global economic unrest, gold tends to perform well as investing in gold increases due to its safe-haven status. For example, in 2020, during the economic turmoil caused by the coronavirus pandemic, gold prices surged to historical highs. The same can be said now, in 2022, with the ongoing Russia-Ukraine conflict.

 

  • Interest Rates
    • Many traders and investors use the financial markets in search of a 'monetary return' on their capital. In times of rising interest rates, the attraction of online gold trading diminishes as investors can get a better return in other asset classes which benefit from rising interest rates, such as currencies or bonds.

 

  • Global Economic Data
    • As gold is perceived as a safe haven asset, any significant changes in global economic data can have an effect on the demand for gold. For example, if the global economy is not growing then investors will fear a slowdown could be around the corner and may choose to exit higher risk investments such as equities in favour of investing in safe-haven assets such as gold.

 

  • The US Dollar
    • Currency movements in the US dollar can have a big impact on the price of gold. This is because gold is denominated in US dollars. Therefore, a falling US dollar can push gold prices higher and vice versa.

All of these influences are a form of fundamental analysis that can be difficult to analyse.

Many traders choose to wait for the fundamental picture to unfold as this will be evident on the price chart of gold through rising or falling prices.

Using a combination of these forms of analysis can be powerful but also depends on the individual trader's style: whether they are investing in gold for the long-term or just trading it short-term.

Choosing a style can be important as it can dictate how to trade gold. While we have briefly mentioned using gold CFDs, it is important to consider your strategies used when online gold trading. In the next section, we will overview how to trade gold in more detail.

Online Gold Trading Strategy

A common question in the world of trading and finance: is it beneficial to trade gold online? Is it better than investing in gold?

The gold market is ideal for nearly all different types of strategies such as day trading, swing trading, position trading and more.

Day trading gold is popular due to the fact that the gold market is open nearly 24 hours a day, five days a week - making it one of the most liquid markets to trade on.

However, as the price of gold is affected by a variety of factors such as geopolitical tensions, the US dollar and interest rates, the price action of gold can be quite volatile.

In fact, the price of gold can often exhibit multiple types of market conditions in a short period of time such as an uptrend, a downtrend and a sideways ranging market.

This is why some traders use technical indicators such as Bollinger bands in their trading strategy.

Bollinger bands are used to identify markets that are quiet, and often moving sideways, as well as markets that are showing increased volatility and are about to trend in a certain direction.

The Bollinger band tool itself is comprised of three lines.

The middle line is a 20-day Simple Moving Average (SMA) and is used to calculate the value of the upper and lower bands. These bands are two standard deviations away from the 20-day simple moving average (SMA).

The Bollinger band indicator is free with the Admirals MetaTrader trading platform. To insert the indicator, follow these steps:

  • Open your free Admirals MetaTrader 5 WebTrader platform.
  • Find 'gold' in the Market Watch column (Ctrl+M). Drag and drop the symbol onto the chart.
  • Select Insert from the menu at the top of the trading platform, then Indicators -> Trend -> Bollinger bands, as shown below.

Once selected, the next box will show the default settings for the Bollinger bands. Press OK.

Now you will have the Bollinger bands plotted on the price of gold, as shown below on the 4-hour chart of gold:

Depicted: Admirals MetaTrader 5 WebTrader - Gold H4 Chart. Date Range: 24 February 2022 - 21 March 2022. Date Captured: 21 March 2022. Past performance is not necessarily an indication of future performance.

The Bollinger bands standard deviation is a measure of volatility and many rules around Bollinger bands focus on the price action around the upper and lower bands. In fact, as you'll see in the chart above, there are frequent price action rejections, or turning points in price, of the upper and lower Bollinger bands.

Depicted: Admirals MetaTrader 5 - Gold H4 Chart. Date Range: 2 June 2020 - 11 August 2020. Date Captured: 28 January 2021. Past performance is not necessarily an indication of future performance.

The blue boxes show price rejections of the lower Bollinger band and the red boxes show price rejections of the upper Bollinger band. However, to be able to use an effective day trading gold strategy there needs to be another rule to help identify which band to focus on.

By using a moving average indicator as a trend filter traders can quickly determine what the trend of the market is which can then give more focus when using a day trading gold strategy. For example:

  • If price is above a long-term moving average such as the 200-period exponential moving average traders may only consider long, or buy, positions.
  • If price is below a long-term moving average such as the 200-period exponential moving average traders may only consider short, or sell, positions.

To plot a moving average on your chart simply click on Insert in the top menu in your trading platform, then Indicators -> Trend -> Moving Average. Once this is selected, the following box will show:

Select 200 for Period, Exponential for Method and the colour of your choice (red in this instance). Now the long-term 200-period exponential moving average will be shown on your gold trading price chart:

Depicted: Admirals MetaTrader 5 WebTrader - Gold H4 Chart. Date Range: 24 February 2022 - 21 March 2022. Date Captured: 21 March 2022. Past performance is not necessarily an indication of future performance.

In this instance, the price of gold has stayed above the moving average, meaning that buyers are in control. Therefore, traders may only consider trading the rejection of the lower Bollinger band which in this case are the yellow boxes in the chart above.

This highlights some interesting day trading strategy setups as the trading price of gold did indeed reject the lower Bollinger band in the direction of the long-term 200-period moving average in most cases.

To learn how to trade in more detail and master placing your orders on the MetaTrader 5 trading platform click on the video below:

Of course, there will be occasions where your chosen trading rules will be less effective and result in losing trades. This is why risk management and using a stop loss will prove to be beneficial in the long run. They can help to minimise risk in order to have enough capital to trade with on the next trade. After all, trading is about managing probabilities and winning and losing is part of that process.

It is also important to remember that any strategies that have been discussed have not been tested historically for its effectiveness, it merely serves as a starting point to build upon.

Traders can take this one step further by experimenting with different moving average values, learning additional price action patterns in the Admirals Educational library and adjusting the timeframes.

Why Trade Gold Online with Admirals?

There are a variety of benefits to trading with Admirals, including:

  • Trade 24 hours a day, five days a week on a wide range of asset classes.
  • Trade with a well-established, highly regulated company including regulation from the highly respected UK's Financial Conduct Authority, the Australian Securities and Investments Commission, and Estonian Financial Supervisory Authority and Cyprus Securities and Exchange Commission.
  • Trade on margin. Retail traders can trade leverage positions that are up to 30 times their account balance (depending on the instrument). A professional trader can trade positions 500 times their account balance (If you would like to learn more, make sure to check out Admirals 'Retail & Professional Terms').
  • Benefit from negative balance protection policy for peace of mind.
  • Access the MetaTrader trading platform for Windows, Mac, Web, Android and iOS operating systems. This means you can have your very own gold trading app to buy and sell gold CFDs.
  • Access the Admirals MetaTrader Supreme Edition plugin for advanced trading tools such as the Sentiment Trader and Advanced Order functionality completely free!
  • Minimum account opening just 100 EUR, GBP, USD or CHF!
  • Trade gold with spreads of just 16-22 pips.
  • Trade gold with zero commission. You only pay the spread and swap for any overnight positions.

Trade Risk-Free With an Admirals Demo Account

If you would like to test drive some of the exclusive Admirals trading features listed above, then why not try a free-access demo trading account? This allows you to trade in a risk-free environment until you are ready for a live trading account. To open your free demo account, simply click the banner below:

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Online Gold Trading: Frequently Asked Questions

How Do I Trade Gold Online?

The most convenient way to trade gold online is with a reputable broker that offers the option to trade Gold (against the USD). Start by:

  1. Creating a Trading Account
  2. Choose which Gold market you're interested in trading.
  3. Deposit into your Trading Account.
  4. Open a Position and Set your Stop Loss.
  5. Monitor your trade.

Is Online Gold Trading Profitable?

This question is completely subjective based on the experience, knowledge, and time available of the trader. A few factors to keep in mind:

  • Use both fundamental and technical analysis to understand price swings and trends.
  • Understand the economics behind Gold - Understand how it influences the global economy (and when).
  • Typically, Gold has a negative correlation with the stock market. When the stock market is declining, Gold tends to rise.

What is the Best Platform to Trade Gold?

Again, this is a very subjective question. It is most important that you choose a broker with a good reputation - for example, a broker that has a high rating on TrustPilot. You also want to consider a broker with no or low commissions and low spreads.

INFORMATION ABOUT ANALYTICAL MATERIALS:
The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals and Admirals trademarks (hereinafter “Admirals”). Before making any investment decisions please pay close attention to the following:
1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
2. Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest.
4. The Analysis is prepared by an independent analyst (hereinafter “Author”) based on the Brandie E Blackler, Financial Writer and Analyst personal estimations.
5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
6. Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admirals for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
7. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved.

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