Spot Gold Trading

Spot Gold Trading

Since the turn of the millennium, spot gold trading has re-gained popularity thanks to greater price volatility and easy access via online brokers. ThinkForex has structured its gold trading to ensure customers can trade gold contracts in an intelligent manner. Below is a list of benefits this entails:

Gold Trading Benefits

  • Trade gold against the Euro, US dollar, Australian dollar, and Japanese yen
  • Trade in increments as small as 1 ounce
  • 500:1 Leverage to allow for both conservative and aggressive strategies
  • Trade Side by Side with Forex Pairs

A Gold Trading Example


Margin Calculations

 
Margin Calculation (100 x Price x Lot Size) / Leverage
Example: 100 x 1425.00 x 1.0 = $142500 / 200 = $712.50
Leverage is 200:1 in this example
Gold moves in 0.10 increments with a value of $10 per 1.0 lot. Gold whole increment values can be calculated by multiplying tick value, lot size, and market movement (Closing Price - Open Price x 10)
In this example, the position (0.25 lot) was closed at 1440.00 from a 1438.00 open. Market movement = (1440.00 - 1438.00) X 10 = 20 whole increments P&L Calculation 10 x 0.25 x 20 = $50

CONTRACT SPECIFICATIONS

 
Contract Symbol XAU/USD
Contract Size 100 oz
Whole Increment Size 0.10
Whole Increment Value per 1.0 Lot $10
Trading Hours (GMT) Sunday 23:00 - Friday 22:00

To illustrate how spot gold trading with ThinkForex works, let's take a hypothetical example:

Suppose a trader opens up an account with 5,000 dollars. Since 500:1 leverage is offered, he/she can buy 2.5 million dollars worth of gold (500 * 5,000 customer account balance). (Leverage should be used with great caution, as using extreme leverage can result in both rapid gains and rapid losses.)

For convenience sake, let's assume gold is trading at 1,000 dollars. This would mean the trader can buy up to 2,500 ounces of gold (2,500,000 / 1,000 = 2,500).

Let's say the trader buys 2,000 ounces of gold, or 2,000,000 dollars worth of gold. In such a scenario, the trader's margin requirement is approximately 4,000 dollars. If the floating value of the trader's account falls below this amount, the trade will automatically be closed out.

In our example, If the price of gold declines by just 0.50, the trader will have a floating of loss of 1,000 (.50 * 2,000 ounces purchased = 1,000). In this scenario, the customer's gold trade would be closed out immediately. If the trader uses less leverage, perhaps 10 ounces, he/she can tolerate more price fluctuations.

Ultimately, gold trading through ThinkForex is virtually identical to how forex trades occurred. For a full breakdown of all the contract terms ThinkForex provides for gold trading, see our contract specifications page.

Resources to Help You Trade Gold the Smart Way

As with all other financial instruments, success in trading gold depends on finding an edge. Below are links to help traders gain an edge in their gold trading:

Information on Supply and Demand from the World Gold Council

Infographics on Gold

Gold Mining News