Gold Trading UK – Beginners Guide

Gold trading is a great investment option. Gold trading can be a true gold mine. This can help you raise capital, diversify your portfolio and grow your wealth. But it is also one of the most difficult because it is also used by various industries and as a storehouse of wealth. This guide will help you understand how and where to start buying or trading gold.

What is Gold Trading?

The term “gold trading” can refer to various forms of investment. In other words, gold trading usually involves buying and selling gold to make a profit. It consists of short-term trading strategies aimed at making small but frequent returns.

Ways of Trading Gold

gold trading

This section of our guide to trading gold in the UK is perhaps the most important. There are multiple ways to access the market. For example, some methods are suitable for intra-day trading, while others are more beneficial for long-term investments. The most popular gold trading ways-

Gold CFDs

If you are interested in trading the short-term value of gold, there is no better way than CFDs. As mentioned earlier, the role of CFDs is to track the price movement of an asset from seconds to seconds. In other words, if the value of gold increases by 0.37% in the open market, the CFD will also increase and in the same way, a decline of 0.21% is also reflected in the CFD. This means you can trade gold for more money than you have in your brokerage account. In the UK, regulations allow up to 1:20 leverage on gold CFDs. This means a balance of £100 allows for a maximum trade of £2,000. You may also run out of gold CFDs.

Gold Future

Gold futures work in a similar way to CFDs. This means you can apply leverage and choose a buy/sell position.  Mostly gold futures are settled in cash. This means that if you don’t throw away the futures before expiry, you don’t need to get the physical bullion.

Gold options

An option contract is a sophisticated form of trading. You will trade the future value of gold, but you can do so by paying a “premium”. You can access the market with this premium, often in the range of 5-10% of the total contract price. Like futures, options contracts always have an expiry date. However, the main difference is that when you trade options, you are not obligated to buy or sell an asset. Instead, as the name suggests, there are “options” that you can purchase.

Gold ETFs

Gold ETF is an ETF that should track the price of gold rather than tracking a stock index. Gold ETF is an alternative solution to buying gold directly. Despite being composed of gold-backed assets, investors do not own the actual product. Rather, they can further diversify their portfolio by owning a small amount of gold-linked assets.

Advantages of Gold Trading

Gold is the most precious metal and it is always considered as the safe-haven asset for future investment because gold prices never see a downfall. It is always beneficial to invest in gold. There are so many advantages of gold trading and a few of them are-

Hedging

Gold is primarily known as a haven to retain its value during recessions. Gold is traditionally used as hedging tool. Therefore, many investors choose to invest in gold to protect themselves from all the risks of the market.

Liquidity

A high level of liquidity is always a priority for traders and large financial institutions. Gold is the world’s most traded precious metal and one of the most traded commodities. This means you can always find gold-related financial news and analysis.

Large trading volume

Gold, a major asset class, benefits from significant trading volume. This in turn gives the broker a lot of liquidity. This allows you to benefit from narrow spreads. All in all, this provides a very favorable environment for trade.

Leverage

In the traditional gold market, you can only invest within your budget. However, some gold trading products allow you to access the market with leverage. This means you can enter gold trading positions that are worth more than you have in your brokerage account.

Tax benefits

If you are a UK resident, you should consider trading a margin betting account. In this case, UK earnings are exempt from Capital Gains Tax (CGT). The best-known UK brokers offering margin betting account trading include FXCM and IG Markets.

How to make money by trading gold

You can make money by trading gold if you accurately predict the direction of the market just like other financial instruments. In other words, you can buy gold and make a profit when the price rises. If you short the gold and the price falls, you also make a profit. It ultimately depends on the success of your market predictions whether you make money or not. How much you bet on each trade also affects how much you can win. Experienced traders usually set weekly/monthly goals, although this may vary from person to person. Most importantly, you can create more profitable trades than you will lose in the long run.

gold trading

Day trading

When trading gold during the day, it is rare to hold a position overnight. Instead, you can hold an open position for hours or minutes. So you can chase a very small profit margin, but often there is.

Long-term trade

Short-term gold trading is not for everyone. After all, you should actively research the gold market and then trade all day. You should also have a solid understanding of how to read charts and perform technical analysis. If that sounds like it, then long-term investments may be more suitable for achieving your goals. This is because short-term price movements are not attractive. Instead, you will want to keep investing in gold for several years.

Gold Trading Strategies

If you want to make money by trading gold, you need to understand at least one trading strategy. No two gold trading strategies are the same, so finding a strategy that fits your investment goals is important. Top gold trading strategies are-

Swing trading

When investing in gold, you want to follow broad trends in the market. For example, if gold is performing well, experienced swing traders will want to hold a long position during an uptrend. So, if gold appears to be losing strength, traders are more likely to abandon their positions. If the gold price turns out to be falling again, the swing trader can switch to a sell order. This flexibility means that swing trade positions can be open for days, weeks, or months.

Scalping Trading

Sometimes the gold price moves in a narrow range. For example, prices range from $1,500 to $1,600 over several weeks. This can be frustrating for swing and day traders looking for volatility but is very helpful for scalping trading.

Long live with support

In UK gold trading, a “support level” is a specific price point that historically prevented the price from falling further. It’s not an exact science, as there is a chance that gold will break out of support. However, one strategy to consider is to enter the market just above the support level. You should also consider entering a Stop Loss just below the support in case it breaks.

Factors keep in mind while choosing a trading strategy

Following factors should consider while developing a strategy-

  • Buy Size: Think about how much stock you want to get. Many traders are intoxicated and occupy large positions in metals.
  • Physical Gold:  Traders mostly avoid physical gold because it involves so much risk. However, physical gold is often used as a store of value in times of inflation and is by no means safe.
  • US Dollar: Movements in the currency market can have a significant impact on gold prices, especially the US dollar, the world’s reserve currency.
  • Think long-term: Gold is a volatile asset and can fluctuate significantly. At the same time, metal has a long commercial history. Traders should keep an eye on key long-term support and resistance levels for clues as to where the metal is heading next.

Best Gold Trading Platforms

Now is the time to discuss gold trading platforms in the UK. For smooth trading, it is important to choose a good trading platform.

There are hundreds of platforms to choose from in the UK, so take the time to work out fees, commission, tradable markets, regulations, and more. If you don’t have time to find a broker then you can consider our guide.  Below are some of the best gold trading platforms in the UK right now.

eToro

eToro gold trading

eToro is an online trading platform that offers everything from CFDs on stocks, ETFs, forex, cryptocurrencies, and commodities. This means there are many different gold-related markets to choose from. For example, the platform offers gold CFDs that can be traded 24 hours a day. You can choose short and long, and you can also use leverage. On eToro, this is 1:20.

eToro also lists a variety of gold ETFs. This includes SPDR Gold, the world’s largest ETF and backed by physical gold. This is a profitable way to invest in the long-term value of gold. This is mainly because eToro does not charge any transaction fees. You must first meet a minimum deposit of 200 USD. You can deposit by UK debit/credit card, e-wallet, or bank transfer. Your money is always safe with eToro as the platform is regulated by the FCA.

Plus500

Plus500 gold trading

Plus 500 is a highly regulated broker specializing in CFD products. The platform offers several gold-related markets, all of which are leveraged and you can choose between buying or selling positions. This includes the gold CFD market with very narrow spreads.

You can also trade calls and put options on gold. It offers a variety of strike prices so you can choose a market that reflects your risk tolerance. There are no fees to pay when trading Plus 500, and deposits and withdrawals are free. Minimum deposits start at €100.

Capital.com

capital.com

Capital.com is an FCA-regulated trading platform serving over 3,000 markets. This includes the gold spot market, which can be traded for both the long and short term. Again, up to 1:20 leverage is offered when trading Gold CFDs. The platform does not charge any trading fees for the asset and the gold spread averages between 0.50 and 60 pips, which is a good value.

Capital.com also offers a trading application ideal for entering positions on the go. We believe the Capital.com trading platform is easy to use, and it is a good choice if you are a complete beginner. You can also find many educational materials. You can open an account for as little as £20 when depositing by debit/credit card or e-wallet.

How to start gold trading UK

Once you choose the online broker then you can start trading. Now we will guide you through the process of starting a gold trading account. The following guidelines are based on eToro, a commission-free broker that offers a variety of gold-related trading markets.

eToro gold trading image

Step 1: Open a stock trading account

Visit the eToro website and select “Open Account”. You will be asked to enter certain personal information, including your national insurance number. You will also need to provide and verify your mobile phone number and email address.

Also, UK money laundering laws require you to upload some verification documents. The identity document could be your address proof or passport. The latter can be a utility bill or bank statement, but usually should be dated within the last 3 months.

Step 2: Deposit the funds

You will now be prompted to deposit. You can make the payment through debit card, credit card, e-wallets, bank transfer, and wire transfer. eToro requires a minimum deposit of $200. There is no fees or commission charged on trading. 

Step 3: Choose a Gold Trading Market

eToro offers several markets for trading. If you want to engage in short-term trading, CFDs are your best bet.  Alternatively, consider gold ETFs if you want to invest in the long-term value of gold.

Step 4: Conduct Gold Trades

Once you find a gold trading market you like, you need to set up an order. As I have said repeatedly in this guide, you should choose either a buy or a sell order depending on the direction you think the market is going.

You will also need to enter your wager and, if applicable, the amount of leverage you wish to apply. It is recommended to set a Stop Loss order to mitigate potential losses. Positions taking profits can be helpful as they can lock profits.

Few Tips for gold trading UK

We have told you all the measures that should keep in mind while trading in gold. We are sharing a few tips to the traders that should keep in mind while trading. These tips are-

Beginners should use the demo account

Demo accounts are a great way to learn how the real gold market works without putting your own money at risk. Most online brokers offer these accounts and are filled with “banknotes”. This gives you unlimited access to the gold market and allows you to execute buy and sell orders as you wish. This also provides an opportunity to learn how to read and evaluate gold price charts.

Test Gold Trading Signal

Trading signals are widely used in the Forex and Cryptocurrency sectors. In this context, more and more suppliers are sending signals to cover the gold trading scene. A business “tip” that tells you what to do for those who don’t know. This golden signal provides specific prices associated with entering, exit, stop loss and take profit orders. Be sure to check the credibility of your gold signal provider before signing up as the signal provider space is dominated by scammers.

Read the Gold Trading Book

A gold trading book is a great way to improve your knowledge of the gold trading market. Find books with chapters on:

  • Gold trading market
  • Commercial strategy
  • Graphical analysis and technical indicators
  • Crisis management

Follow Copy Trading

Copy trading is a relatively new phenomenon in online investing. For those who don’t know, a provider like eToro lets you pick the seller you like and then similarly mirror your order. This means you can trade gold full-time without having to work.

Read News and Analysis on Gold Trading

The supply and demand for gold are usually determined by real news. Of course, this directly affects the future value of gold, so it is important to stay one step ahead. The best way to do this is to log into a financial news website that will send you notifications whenever there is a gold-related development.

Conclusion

Gold trading is very popular with experienced investors. Whether you’re negotiating the short-term price of an asset or investing for several years, there is a gold trading market for most needs. With this in mind, avoid jumping into the gold market without doing minimal research on how it works. It’s also a good idea to start with a live demo account. In this way, you can trade the market without betting money.

When you are ready to start trading immediately, the FCA regulated platform eToro offers several gold markets with no fees. With a UK debit/credit card, you can open an account in minutes and deposit funds instantly.

Frequently Asked Questions

How do I trade gold online?

The main premise of trading gold is that you have to decide which direction you think the market is going. This means that if you think gold is going to go up in value, you should place an order to buy it. If you have any other thoughts, you should place a sell order.

Can I invest in physical gold?

Yes, there are many ways to invest in physical gold. For example, you might consider investing in an ETF backed by physical gold. Or some online retailers sell real gold by the gram. Gold is kept in a safe and checked regularly.

Can you short sell gold?

You can do it. You can do this by shorting gold in CFDs. You can also sell gold through futures and options.

Who determines the price of gold?

Market forces determine the prices of gold. After all, it depends on supply and demand.