What are the differences between physical gold trading and CFD gold trading?
Physical gold trading involves buying and selling actual physical gold, such as gold bars or coins, while CFD (Contract for Difference) gold trading involves buying and selling a contract that represents the price movement of gold without actually owning the physical asset.
Here are some key differences between physical gold trading and CFD gold trading:
- Ownership: When you buy physical gold, you own the physical asset, and you can store it yourself or have it stored in a secure vault. With CFD gold trading, you do not own the physical asset instead, you are trading on the price movements of gold.
- Liquidity: Physical gold can be more difficult to buy and sell quickly, especially if you own large quantities or unusual sizes or types of gold. CFD gold trading, on the other hand, allows traders to easily enter and exit positions quickly, as there are typically more buyers and sellers in the market.
- Leverage: CFD gold trading allows traders to use leverage to increase their exposure to the market. This means that you can trade a larger position with a smaller amount of capital. Physical gold trading does not offer leverage.
- Costs: Physical gold trading may involve costs such as storage fees, transportation fees, and insurance costs. CFD gold trading, on the other hand, typically involves only trading fees such as spreads, commissions, and overnight financing fees.
- Market access: CFD gold trading allows traders to access a wider range of gold markets, including international markets, and to trade on the price movement of gold in real time. Physical gold trading, on the other hand, may be limited to local markets and may not offer real-time price information.
How to choose a broker for trading gold?
When looking for a gold trading broker, you should pay special attention to the following points.
Can I trust the broker?
Take into account the regulatory status of the broker. CFD brokers regulated by top-tier financial authorities must undergo audits, meet capital requirements, and provide segregated accounts and negative balance protection. A compensation fund is sometimes available in the event of broker insolvency.
Tip: you can search the regulator’s website to confirm the broker’s status and check for any disciplinary action. The broker’s size and operating history are also worth considering. You can usually find these on the company’s LinkedIn page.
Read more about Best estrela bet:regulated forex brokers.
What to look for in the brokers’ gold offering?
Forex and CFD brokers typically offer spot gold (XAU/USD), which reflects the live price – theᩚᩚᩚᩚᩚᩚᩚᩚᩚ𒀱ᩚᩚᩚ cash market. Some brokers also provide gold against other currencies, such as XAU/GBP, XAU/EUR, and XAU/AUD. In some instances, you can trade gold against crypto, for example, Bitcoin against gold (BTC/XAU).
A variety of other gold-related CFDs are sometimes available – these include CFDs on gold futures, gold options, and ETFs related to gold such as the SPDR Gold Trust (GLD). A handful of CFD brokers also offer ‘real’ (non-CFD) gold futures and options trading.
Explore our list of estrela bet:Best CFD brokers.
An intuitive, easy-to-navigate platform will allow you to launch into the trading world with minimal hitches. The most user-friendly platforms are typically browser-based platforms created by the broker. Look for easy-to-implement features such as watchlists, trading from the chart, search, news, and a customizable interface.
The MetaTrader 4 and 5 platforms have advanced features like backtesting, automated trading, and a wide range of order types – but are less user-friendly. Also, check on the availability of a good, broker-designed (proprietary) mobile app.
Read more about estrela bet:Best MetaTrader 4 brokers and estrela bet:Best MetaTrader 5 brokers.
Are the fees competitive for gold?
Working with a broker that keeps the spreads to a minimum can make the difference between profit and loss at the end of the day. This is a crucial point for day traders. We rate gold spreads of above 55 pips as high, 36-54 pips as medium, and less than 35 pips as low.
Find out estrela bet:B💝est forex brokers with lowest spreads.
What is the minimum deposit?
Find out the minimum initial deposit so you won’t be taken by surprise when it’s time to trade live. This can vary from $0 in the case of Exness to $200 in the case of IC Markets. Typically, the minimum deposits at CFD brokers are relatively low.
What is the available leverage?
The available leverage at CFD brokers is a significant benefit when trading a commodity like gold. If you want to invest in gold bullion, leverage is not available. When trading gold ETFs, 1:2 leverage is typical. CFDs on gold offer a much higher degree of leverage, typically between 1:20 and 1:500, depending on which financial authority regulates your broker.
Beware of using excessive leverage, even if it is tempting. It’s an enthralling feeling to control a large position in the market. But when markets are moving fast, and you are holding a highly leveraged position, there is a high risk of losing money. Accounts can get wiped out in seconds.
Explore estrela bet:Best forex brokers with high leverage.
What to avoid when choosing a gold trading broker?
When choosing a broker for trading gold, you should look for competitive spreads and swap fees. If you want to day trade gold, you should look for a broker that offers 1-click trading. Without 1-click trading, the order entry process is too slow for such a fast-moving market. If you plan to hold positions over days or longer, check the swap fees, which can be very expensive over time.
How to avoid forex and CFD scams?
A common scam in the forex and CFD industry involves vendors offering a trading strategy that guarantees an outlandishly high return in little time. These may involve automated trading using bots or a signal service where trades are shared via chat or social media. Nobody can guarantee returns with certainty, and it is more likely that such strategies will lose money. When assessing strategy or signal providers, you should look for a live track record audited by a third party, but remember that past performance does not guarantee future results.
Traders should also be highly cautious about opening an account with an unregulated offshore broker. Such brokers may offer a straightforward account opening process, bonuses, and high levels of leverage but client funds are not protected. Meanwhile, brokers regulated by top-tier authorities must undergo regular audits and are held accountable for misconduct. Traders can also benefit from having their funds held in segregated accounts, negative balance protection, and a compensation fund in the event of broker insolvency.
Our Methodology
Our selection of top forex brokers for beginners is based on our unique, thoroughly refined proprietary methodology. FXEmpire, a pioneer in CFD broker reviews since 2010, has developed a detailed analysis process, involving over 250 data points per broker.
We categorize brokers into nine key areas: Trust, Fees, Platforms and Tools, Tradable Instruments, Customer Service, Deposit and Withdrawal, Account Types, Research, and Education. Our reviews clarify complex topics like regulatory status for an easy understanding of fund safety and benefits.
Our rigorous evaluation includes live testing, research, questionnaires, and broker demonstrations. We open accounts with each broker, focusing on standard account types and platforms, testing spreads, swap fees, and other costs.
Our comparative analysis assesses broker competitiveness industry-wide, highlighting platform features and usability. FX Empire maintains high editorial integrity, with reviews based on objective, measurable data, free from personal biases, and regularly updated for accuracy.
For this guide, we focused on brokers offering competitive gold spreads and swap fees, ensuring high transparency in their fee structures. We prioritized brokers that provide diverse trading options for gold, including asset classes like options, spread betting, shares, ETFs, and futures. Our evaluation included a thorough test drive of each platform, examining the variety of available order types, charting features, watchlists, and overall user experience. Additionally, we ensured that each broker offered a robust selection of tradable instruments, emphasizing the availability of gold and other commodities.
We abide by our strict guidelines for editorial integrity based on the objective standards we have set for our reviews. You can read more about our review process here.
Meet our Writers
The team of forex and CFD analysts and editors at FXEmpire is composed of trading industry professionals and seasoned financial journalists. Our experts have been published on leading financial websites such as Investopedia and Forbes. In addition, they all have extensive trading experience.