Metals trading

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What is Metals trading?

Metals trading refers to the buying and selling of precious metals, which are rare, naturally occurring metallic elements with high economic value. These metals serve both industrial and investment purposes. Industries use them for producing various products, including electronic components, jewelry, dental equipment, and catalytic converters, while investors collect coins and bars made of precious metals.

Investing in precious metals has made them the subjects of intense speculation in commodity markets. Traders view them as a form of currency that holds its value better than printed paper money. However, some skeptics argue that precious metals have limited utility beyond their industrial uses and are simply overpriced rocks. Ironically, the high premium placed on precious metals by traders makes them too expensive and impractical for most industrial applications.

How to trade Gold

How does Metals trading work?

Gold trading using a contract for difference (CFD) is similar to forex trading, where traders buy or sell gold CFDs based on market price movements without owning the physical precious metal. XAUUSD is the symbol used for gold trading against the US dollar, and traders can sell or buy the “pair” when they predict a fall or rise in the gold price, respectively, just like with currency pairs.

For example, XAUUSD shows us that 1 ounce of Gold = $1895.24 USD.

Once you are prepared to trade, you have the option to take a long or short position. Going long indicates that you expect the value of gold to increase against the US dollar, while going short implies that you anticipate a decrease in its value.

Factors Affecting
Precious Metal Prices

The factors that influence precious metals include but are not limited to:

Supply and Demand

Like all products and services, the laws of supply and demand also apply to precious metals. A shortage, surge in need or interruption in production will result in an increase in metals prices. Conversely, faster extraction through technological improvement or other factors could saturate the market and diminish their value.

Economic Instability

Market conditions including currency prices have a direct impact on metal prices. Precious metals are traditionally negatively correlated with the US dollar making them a useful hedging tool in times of economic instability. The same applies during political uncertainty and unexpected global events.

Regulation and Economic Decisions

nything that dilutes the value of a currency results in an increase in precious metal prices. This is the case with quantitative easing (printing additional money) and higher rates of inflation. As metals are considered an alternate investment to the cash rate provided by financial institutions, their value generally decreases when interest rates rise.

Industrial Output

The continual increase in industrial uses will have a positive impact on metal prices. Precious metals are being used in high performance applications such as electronics, energy and automotive related products. An increase of demand in these products and new applications will increase demand and precious metal prices.

Are Precious Metals a Good Investment?

Precious metals are a unique asset class as they have intrinsic value, provide protection against inflation and carry a safe-haven status. When utilised to diversify a portfolio, precious metals will reduce both volatility and risk.

Trade Precious Metals With a Provider Invested in Your Success

Open a HedgeHood trading account today and join over a million others globally trading 2,000+ markets on an easy-to-use platform. Go long or short with competitive spreads on indices, shares, forex, gold, commodities, cryptocurrencies, bonds and more. Plus, get extended hours on major US shares, AI-powered tools and 24/5 client support. Learn more about trading CFDs with HedgeHood.

Buying XAUUSD

Gold trading example

The gross profit on your trade is calculated as follows:

Opening Price

$1,899.55 × 1 lot (100 ounces)= $189,955

Closing Price At $1902.05 × 1 lot = $190,205Gross Profit on Long Position $190,205 – $189,955 = $250

Closing Price At $1,897.05 × 1 lot = $189,705Gross Loss on Short Position $189,705 – $189,955 = -$250

Opening the position

Assuming the price of Gold against USD (XAUUSD) is $1,899.55, you opt to purchase 1 lot, resulting in a total value of $189,955 USD.

Closing the position

If you decide to sell 1 lot of XAUUSD at $1,902.05 two weeks later, you will have a total value of $190205 and a gross profit of $250. On the other hand, if the price of XAUUSD falls to $1,897.05, the total value of your trade will be $189705, resulting in a loss of $250.

Trade from 0.0 pips

Typical Metals spreads

		Standard account		RAW Account
Symbol	PRODUCT DESCRIPTION	MIN	AVG	MIN	AVG
XAUUSD	Gold vs Us Dollar	0.16	0.21	0.02	0.07
XAUAUD	Gold vs Australian Dollar	0.21	0.72	0.11	0.62
XAUEUR	Gold vs Euro	0.14	0.45	0.27	0.19
XAGUSD	Silver vs Us Dollar	0.14	0.19	0.08	0.13
XAGAUD	Silver vs Australian Dollar	0.41	0.41	0.35	0.35
XAGEUR	Silver vs Euro	0.02	0.02	0.02	0.02

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