Gold & Silver CFDs

What are Metals CFDs Trading?


A contract for difference (CFD) is a contract under which the parties agree to exchange the cash difference between the opening value and the closing value of the contract. Metals CFDs are over-the-counter contracts that give you exposure to price movements of the underlying metals. Like other derivatives, CFDs allow investors to participate in the returns from movements in the underlying metal, without actually owning it. You can trade Gold and Silver CFDs on the MT4 trading platform. You can use these CFDs to speculate on movements in the gold or silver price, or as an inflation hedge.

Features of metal CFDs

  • Trading metal CFDs offers investors leverage and flexibility. No physical bullions are exchanged. Investors are only trading the price difference.
  • Investors can have Long or Short Positions. If you think the bullion price will go up, you can open long position. If you think the price will go down, you can open a short position.

01-27The gold price is constantly changing throughout the trading day. The main factors that will affect the gold price include central bank monetary policies, supply and demand, and unexpected political events or wars.

The gold price is traded against US dollar. The strength and weakness of US dollar will also have big impact on gold price.

Gold CFD Trading Example


On MT4 platform, the Gold CFD is showing as XAU/USD. You can locate it from the Market Watch panel. It’s traded on margin. Below example illustrades how does the Gold CFD work:

Platform price: XAU/USD is showing 1,280.20/1,280.70 on 19 June 2014, with 50:1 leverage.

Trade direction: Long (anticipate the gold price will go up)

Trade size:1 lot = 100 ounces,$1,280.70/ounce

Total trade value: 100 x $1,280.70 = $128,070

Margin requirement:$128,070 x 0.02 = $2561.40

If gold price went up on the same day to:$1,310.20/1,310.70

Position close at:$1,310.20, with total 100 ounces value at $131,020

Trading profit:$131,020-$128,070=$2,950

If gold price dropped down to: $1,270.20/1,270.70

Position close at:$1,270.20, with total 100 ounces value at $127,020

Trading loss:$128,070-$127,020=$1,050

CFDs are leveraged contracts, which means a small price movement in the underlying asset on which they are based can result in substantially magnified profits or losses, exceeding your investment. Leverage allows investors to take larger exposures, however it similarly makes them susceptible to larger losses. Trading in CFDs and other OTC derivatives entails risk and is not suitable for investors who are not trading with risk capital (money you can afford to lose). CFDs are cash-settled and provide exposure to price movements in the underlying instrument, rather than ownership or physical delivery of the underlying instrument. Please ensure you obtain independent professional advice before investing in CFDs, and read our Financial Services Guide, and the issuer’s Product Disclosure Statement to ensure you understand the key risks and costs associated therewith. Please click risks warning for further information regarding the risks.