Trading Precious Metals and Gold CFDs

CFDs on Gold 

There are two main categories of metals, the industrial metals and the precious metals. A key difference between these two categories of metals is that precious metals do not react with oxygen while industrial metals do react with oxygen.

The three major precious metals include gold, silver and platinum. CFD brokers trade these three precious metals and some of them offer also palladium. The main industrial metals include copper, aluminium, zinc and lead. CFD brokers usually offer only copper.

Industrial Metals versus Precious Metals

The price of an industrial metal reflects the overall state of our world’s economy. The stronger the economy is the higher the investment for building new houses and infrastructure. The higher the expenditure for housing and infrastructure the higher gets the demand for industrial metals, so gets the price. But as concerns precious metals this is not always the deal. Precious metals tend to trade within longer cycles that usually last a decade. The precious metals are used mostly as investment assets (35%) and as raw material for jewelry (45%). Normally they should reflect the condition of our world’s economy. But on the contrary the price of precious metals tends to peak during financial and political crisis, wars etc. Gold is seen by investors like a ‘safe heaven’ during economic crisis.

Industrial Metals and Major Exchanges Warehouse Suppliers

Traders of industrial metals may use a simple technique in order to evaluate the real supply and the demand for a particular industrial metal. The two major metal-exchanges (COMEX/CME and LSE) offer information about the warehouse supplies.

Therefore by examining the available stock:

(i) If the stock levels higher then the demand is lower or the production is higher

(ii) If the stock levels lower then the demand is higher or the production is lower

 

The Importance of Gold

Gold is by far the most important precious metal for both trading and investment purposes. In the globe there are 156 thousand tons of Gold available today while only 2.5 thousand tons are mined yearly. Gold has been the dominant currency for exchanging goods and service since the beginning of civilization.

J.P. Morgan said in 1912: "Gold is money, everything else is credit"

The Main Characteristics of Gold as a Precious Metal

Here are some key characteristics for Gold:

(1) Gold has unique characteristics as a metal

Gold is characterized by two unique features:

(i) Gold durability over time is extraordinary as it doesn't corrode

(ii) Gold may conduct heat and electricity better than copper.

These two characteristics make gold an ideal metal for electronic applications (mobiles, micro-processors, etc.)

(2) Gold as a Hedging Tool against Inflation

Gold acts historically as a hedging instrument against inflation. As the US dollar falls in value due to inflation, gold which is priced in US Dollar gains value respectively. The historic price of gold helps economists to calculate past values in today’s prices.

(3) High Demand for Gold from Jewellery

Jewellery as an industry is the traditional buyer of Gold. The demand from Jewellery accounts 45% of the aggregate demand for gold each year.

(4) Gold is highly used as a Reserve Currency

Every Central Bank in the world uses Gold as a reserve currency. Moreover commercial banks, investment firms and many individual investors include gold assets in their portfolio. The existence of Gold leads to portfolio diversification.

 

Aggregate Demand for Gold

Here is the basic distribution of the aggregate demand for gold:

(A) Jewellery (45.00%)

China and India count 50% of the total demand for Jewellery Gold. The World Gold Council forecast that by 2020 these two countries together will host 1 billion new urban consumers.

(B) Investment Gold (35.00%)

The demand for investment gold counts more than 1/3 of the total demand for gold.

(C) Central Banks (10.00%)

Central banks traditionally use Gold as a Reserve Currency.

(D) Industrial Applications (7.00%)

This category of demand includes mainly applications in the electronics industry but also fuel cells and the space industry.

(E) Other Demand (3.00%)

This includes demand from other sources, for example gold for dental applications etc.

 

Advantages of Trading Gold and Silver via CFDs

Here are some key advantages when trading precious metals via CFDs:

(1) Competitive Cost of Trading

CFD brokers do not charge trading commissions when trading Gold, Silver or any other metal. They charge only spreads (between ask and bid). Especially as concerns gold trading these spreads are considerably narrow.

(2) Leveraged Trades

As in the case of other CFD assets, trading Gold via CFDs can be leveraged usually 50:1 but it can be leveraged up to 200:1.

(3) Pay no Overnight Rates

If you trade gold via CFD-on-Futures you do not pay overnight rates. The spread is a little bit higher than CFD-on-Cash but if you plan to keep your positions for weeks you can save tons of money by trading on CFD Futures.

(4) Low Minimum Account Requirements

Most CFD brokers provide very low deposit requirements. You can open an account with just $100. Note that trading a contract of gold usually requires an initial margin of $350 in your account.

(5) Easy Trading 24/5

CFD brokers offer a wide selection of trading platforms including Web-Traders, MetaTrader and Mobile Traders. Trading gold via MetaTrader-4 is very useful as you may use advanced charting capabilities, technical analysis, historic back-testing, trading-on-charts and etc. You mat trade Gold via CFDs in 24/5 basis.

 

Comparing CFD Brokers offering Gold and other Metals Trading

Here is a basic comparison between regulated CFD providers offering high safety of money (Providing segregated client bank accounts and have been in the market for at least 5 years).

CFD PROVIDER

ASSETS

TRADING PLATFORMS

TRADING ACCOUNT

WEB-SITE

XM

Asset Classes:

· Forex

· Commodities

· Metals

· Energy

· Indices

· Gold

· Silver

· Palladium

· Platinum

-Offers also:

  CFDs on Futures

■ Web Trader

■ Mirror-Trader

■ MetaTrader4

■ Mobile Traders

SCALPING: YES

$50 minimum deposit

WELCOME BONUS:

30-50%

LEVERAGE:

1:500

WEB-SITE:

 

► XM Web

FXCC

Asset Classes:

· Forex

· Metals

· Indices

· Gold

· Silver

 

■ MetaTrader4

■ Sirix WebTrader

■ Mobile Traders

SCALPING: YES

$100 Minimum Deposit Amount

BONUS:

30-100%

LEVERAGE: 

1:300

WEB-SITE:

 

► FXCC Web

HOTFOREX

Asset Classes:

· Forex

· Commodities

· Metals

· Energy

· Shares

· Indices

· Gold (USD)

· Gold (EUR)

· Silver

· Palladium

· Platinum

· Copper

 

■ MetaTrader4

■ WebTrader

■ Mobile Traders

SCALPING: YES

Free VPS Server for deposits of more than $5,000

$50 Minimum Deposit Amount

WELCOME BONUS:

40-100%

LEVERAGE: 

1:1000

WEB-SITE:

 

► HotForex Web

DUKASCOPY

Asset Classes:

· Forex

· Commodities

· Metals

· Energy

· Indices

· Gold

· Silver

■ Jforex Platform

■ WebTrader

■ JavaTrader

■ Mobile Traders

SCALPING: YES

 

$100 Minimum Deposit Amount

WELCOME BONUS:

10% under A policy

LEVERAGE: 

1:300

WEB-SITE:

 

► Dukascopy Europe

 

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Trading CFDs on Precious Metals

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