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 precious metals, namely, silver and Gold.

In this article, we will discuss 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 usually display out to 4 or 5 decimal places).

Gold Spot and Silver

What is a Metal Currency Pair – How to Trade Spot Gold and Silver?

Trading metal currency pairs on FX platforms refer to “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.

A metal currency pair is similar to a currency pair. 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, then you can trade Gold against other currencies, such as XAU/EUR (euros) and XAU/JPY (yen), but XAU/USD is the most prevalent metal pair.

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

Trading the Gold-Silver Ratio – How to Trade Spot Gold and Silver.

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

We can find out by ratio how many ounces of silver is equal to one ounce of Gold. 

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

In other words, one ounce of Gold is equal to 98 ounces of silver.

Just as with fiat currency pairs, you are trading on an exchange rate, speculating on whether it 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 provides.

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. 

And this is 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 the economy’s perceptions.

. (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.

 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).

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 significant to those looking to hold metals long-term too.

For example:

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

What is driving supply and demand for the metals?

Silver demand drive-by desire 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 palladium).

How to Trade Spot Gold and Silver – Technical Analysis

If you are trading short-term

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

An excellent 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.)

Conclusion – How to Trade Spot Gold and Silver.

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

My name is Muhammad Shahid, MBA in Finance from IBA, University of Sindh, Professional Forex Trader & Trainer, I have taught more than 850 Students throughout the Sindh.

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