Precious Metals

Precious Metals are rare, highly tradable commodities, with a high economic value. These metals are often seen as safe haven investments during times of economic or political uncertainty and turmoil. As such they provide an alternative to investing in other more traditional financial instruments. Gold and silver are two of the most recognised of these commodities and both have a high investment value, due to their relative rarity and multiple sources of demand.

Whether you are looking for a hedge against inflation, a speculative commodity play, or want exposure to alternative assets, Gold trading could meet your needs. In the sections below we will examine the basics of Gold trading. Please be aware that as with all leveraged products, trading in the Gold market can involve significant risk and investors could lose more than their original investment.

What Are Precious Metals?

Precious Metals are tradable commodities that have a high economic value. They are difficult to find and their ores can be expensive to extract. These metals are considered to act as “safe haven“ investments in times of political uncertainty or economic turmoil. As such they provide an alternative to investing in other financial instruments such as stocks and Bonds. Gold and Silver are the two most recognised and actively traded of the precious metals.

What is a spot Gold contract ?

SGCM offers its clients the ability to trade rolling spot contracts in Gold. Which are non deliverable and are settled for cash when the contract or position is closed.

Gold is usually priced and traded in units known as troy ounces. As with the majority of commodities, Gold is priced in US dollars. The standard lot size or trade amount for our spot Gold contract is 100 troy ounces, Silver contract is 5,000 ounces, Platinum contract is 50 ounces, Palladium contract is 100 ounces.

Market participants

There are various types of participants in the Gold markets and they fall into three main categories :

Investors and Central Banks.

Long term investors and Central Banks use Gold to diversify their exposure and as an alternative reserve currency. Recent data shows the US Federal Reserve held more than 8000 metric tonnes of Gold within its reserve currency holdings Germany.The IMF or International Monetary Fund, Italy, France and China all had a holding in excess of 1800 metric tonnes. 

Commercial Producers, users and hedgers.

This group contains the industrial users and producers of Gold such as Miners, Refiners, Jewellery Manufacturers etc, Who use the Gold markets to secure the supplies of Gold they need, or indeed to sell Gold they have produced or stockpiled.From a demand standpoint Jewellery and Technology accounted for some 43% of total Gold demand according to recent data from the World Gold Council.

Trading long or short

One of the advantages to trading cash settled spot Gold contracts, is the ability to trade long or short with equal ease. Long positions are the equivalent of a purchase. Whilst short positions are an opening sale trade . A speculator who trades long has most likely bought Gold in the expectation of a rise in the underlying price. Which they believe will allow them to sell their position at a higher price for a profit. Whilst the speculator who has gone short, has most likely sold Gold in the expectation of fall in its price. Which in turn they hope will allow them to buy their position back at a lower price and hence book a profit.

Other advantages of spot Gold contracts

As we have already noted spot Gold contracts are non deliverable and are settled for cash. This means that private clients and non professional traders can trade Gold without worrying about having to take physical delivery of actual Gold bullion. 

Clients can trade them seamlessly from either the desktop (PC) or mobile (Android/ IOS) versions of the SGCM Trader MT4 platforms. You can even practice your technique before committing your cash with one our Demo Trading accounts.

There are no contract dates, expiries or delivery months to consider in our rolling spot gold contracts. Therefore there is just one price for traders to monitor, rather than a range of prices, one for each a specific month, as found when trading futures contracts for example.

It’s also possible to trade smaller position sizes using our spot Gold contracts.Clients can make a trade in spot Gold that is as little as one one hundredth of a lot.