How to Trade Spot Gold and Silver | Trading Metals

How to Trade Spot Gold and Silver | Trading Metals.

How to trade spot gold and silver -FX platforms are popular not only for trading fiat currencies but also for trading precious metals, namely, silver and gold.

In this article, we will talk about what metal currency pairs are and how you can trade them.

What is a Currency Pair?

Before we move further with our discussion of trading metals, let’s take a look at what currency pairs are.

A currency pair is the ratio of the value of one currency to another.

For example, the EUR/USD currency pair depicts an exchange rate.

Namely, how many USD (US dollars) you would need to purchase one EUR (euro).

In this case, EUR is the “base” currency and USD is the “quote” currency.

When you trade currency pairs you are trading on the exchange rate itself.

Speculating that this number will either go up or down after you enter the trade.

(In FX trading, that exchange rate number is normally displayed out to 4 or 5 decimal places).

What is a Metal Currency Pair?

Trading metal currency pairs on FX platforms also refer to as “trading metals” or “trading spot metals.”

By “metals” we mean precious metals, not base metals like copper or aluminum.

Many traders trade the most common precious metals Gold and silver on FX platforms.

However, some platforms offering FX trading also offer CFDs on other metals including copper.

Gold Spot and Silver

A metal currency pair is similar to a currency pair, but instead of comparing one fiat currency against another, it represents the price of an ounce of the metal in the designated currency.

For example, XAU/USD, tells you how many dollars you would need to purchase a unit (one troy ounce) of gold (XAU).

Trading XAU/USD  also referred to as “trading spot gold” or “spot gold / US dollar.” When you trade XAU/USD you are speculating on the gold-dollar exchange rate.

At the time of this writing, that rate is $1768.95 and it’s changing from second-to-second.

You would buy XAU/USD if you believed that the price is going up during your trade period.

You would sell (or “short”) XAU/USD.

If you expected that price to decline during your trade period.

You can trade gold against other currencies, such as XAU/EUR (euros) and XAU/JPY (yen) but XAU/USD is the most popular metal pair.

Similarly, you can trade silver-fiat currency pairs, such as XAG/USD or XAG/EUR.

Trading the Gold-Silver Ratio

You can also trade XAU/XAG, which is the ratio between gold and silver.

The ratio tells you how many ounces of silver it takes to equal one ounce of gold.

At the time of this writing, that number is 98.9806.

In other words, it takes a little over 98 ounces of silver to equal one ounce of gold.

Just as with fiat currency pairs, you are trading on an exchange rate, speculating on whether that rate will go up or down after you enter the trade.

How to Trade Metal Currency Pairs

In general, forex trading platforms offer both traditional fiat and metal currency pair trading.

The first thing you need to decide is which pair(s) you want to trade and make sure the platform you are signing up with provides those pairs.

Fundamental Analysis: Learn About how to spot Gold and Silver

If you’re interested in trading metals, start by learning about gold and silver and what impacts their price.

This is what’s known as “fundamental analysis.”.

Also, pay attention to news stories about these metals.

Since gold is seen by many as a haven in times of market turmoil, its value can change rapidly based on perceptions of the economy

. (Silver also views as a haven, but secondary to gold.)

You also need to know how assets correlate to each other.

For example, the Australian dollar (AUD) highly correlated with the price of gold, moving up or down in tandem with the yellow metal.

This is because Australia is a top producer of gold.

By contrast, gold tends to have an inverse relationship with the US dollar.

If the dollar goes up, gold often goes down, and vice versa. (This is a simplification; there are exceptions to this tendency).

This is because, in a recession or market crash, investors seek to preserve their wealth by moving it into a “haven” asset like gold.

However, sometimes during a market crash gold may temporarily plunge because traders getting margin calls are having to sell positions in gold to cover their losses.

Overall market trends and news are very important to those looking to hold metals long-term too.

For example:

In times of booming auto sales, the value of the dollar may rise with the value of palladium (used extensively in auto manufacturing).

What is driving supply and demand for the metals?

Silver demand is driven by demand in high tech production.

If this is on the rise, it may indicate a price increase.

So too might the price of palladium if there is a slow-down in platinum mining (which produces a lot of palladium).

How to Trade Spot Gold and Silver – Technical Analysis

If you are trading short-term, (over minutes, hours, or a day or so).

Like most FX traders, then you will want to learn how to use technical analysis tools to detect momentum and future price direction.

A good place to start is — an online course in trading FX.

You’ll also want to make sure you have access to real-time charts.

Beware: some “real-time” charts on the internet are as much as 20 minutes out of date.

And make sure you have a reliable internet connection.

Otherwise, you may be unable to exit a trade if your internet goes out.

(It’s a good idea to have your smartphone charged up with your FX broker’s number handy, in case you have to call in a trade.)


Trading spot metals on FX platforms are popular.

Learning the fundamentals of gold and silver should be within the grasp of beginners.

Take time to become proficient in technical tools before trading though.

And take care to use a demo account as long as possible, because any form of day trading is inherently risky.

About Muhammad Shahid

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