Trading Gold: How It Works (1)

Before you sign up for a trading account, it's important to understand the basics. Gold trading at today's markets provides investors with several options:

Gold bullion - Gold bullion is physical gold, often in the form of bars or specialised coins. The value attributed to the precious metal depends on the type of bullion and unit weight. But while owning physical gold may be easier than procuring large quantities of oil, there are still transaction fees, storage costs, and insurance to consider.

Gold certificates - Similar to cash banknotes and originating in the 17th century, gold certificates demonstrate ownership.

Gold futures - Gold futures and micro futures contracts agree a fixed price for the commodity at a specific date in the future. Because gold futures are traded on exchange platforms, they promise more leverage than dealing in physical gold. Returns are dependent on the fluctuations in price between the time the contract is agreed and the expiry.

Gold CFDs - Gold contracts for difference (CFDs) are short-term orders to buy or sell a fixed amount of gold. Gold CFDs have a set expiry. Returns made trading on gold CFDs will depend on price changes during the contract.

Gold ETFs - Gold exchanged-traded funds (ETFs) are usually purchased from a broker or stock exchange. They allow you to buy a pool of securities, commodities for example, without having to purchase all the individual assets. Costs are low but the value of the ETF is tied to the price of gold.

Gold swaps - Swaps are custom contracts traded over-the-counter (OTC). In contrast, futures and options contracts are found on central exchanges.

Forex Brokers Allowing Gold Trades:

FXCM

XM

IC Markets