Spot gold trading on Forex can be very profitable

Have you ever given a gold ring to your friend as a token of your true love? Gold has been the most precious metal since the dawn of civilization. It is still considered to be the ultimate currency and the ultimate store of value in times of political uncertainty. For the past ten years, the gold market has been in a secular uptrend with spot prices having recently broken the historic barrier of $1,200 per troy ounce. After that, there was a pullback and prices fell to around $1100 per ounce, but this uptrend is expected to continue for some time.

In the last decade, many investors turned to the forex market after the historic stock market crash. Many small investors lost more than 60-70% of their savings accounts in the stock market crash. Now, forex is a great opportunity to make money. It is said that forex trading will make many millionaires in this decade.

Many people do not know that you can also trade gold in forex. Many forex broker platforms that you use to trade currencies allow you to trade gold and silver against the US dollar (USD) from the same platform. Both precious metals are in high demand in the industrial sector and as the global economy recovers from the recession, gold and silver prices are expected to soar as industrial production picks up and consumers begin to buy again. When you trade a currency pair, you go long on one currency and short on the other. In other words, you simply buy one and sell the other.

In the case of spot gold trading in forex, you trade one ounce of gold in the spot market against the US dollar (USD). So, just like when you trade a currency pair, when you trade gold in forex, you are either long or short gold against the USD. There are many currency pairs you can trade such as GBPUSD, EURUSD, UADUSD, NZDUSD, JPYUSD. Spot gold trading in forex is almost similar in that gold replaces one currency in the pair and the other currency is always the USD.

So in forex spot gold trading, you are trading one troy ounce of gold against USD. Interestingly, the symbol for this is also XAUUSD, where XAU stands for one ounce of gold. Now, suppose that the quoted price on the spot market is 1100 XAUUSD. What this means is that one troy ounce of gold in the spot market right now is equal to $1,100 USD.

Like any other financial market, the spot market price of gold has a bid/ask spread. So if the quote price is 1110/1115, it means that you can sell a troy ounce of gold in the spot market for $1110 and buy a troy ounce of gold at $1115, which means you will have to pay a margin of $5 per troy ounce when trading gold in the spot market Trading spot gold in forex is a fast moving market and the spread keeps changing throughout the day.

Now, one standard lot in forex trading is equal to $100,000. But in the case of gold in forex, one standard lot is equal to 10 troy ounces of gold. So if you find the trading price is 1112/1117 and you are interested in going long. In that case you will have to buy 1 lot of gold which is equal to $11,170. The spot gold market is a fast moving market and price quotes keep changing. So, suppose that just after 60 minutes, you find that the quote is 1120/1126. You see a profit and decide to exit by selling at $11,200 for a profit of $30. Now, if you had used leverage, you would have needed a much smaller initial investment to make a profit of $30 in just 60 minutes.

Gold is also known as anti-dollar. What this means is that there is an inverse correlation between gold and the USD. This inverse relationship can help you hedge your positions in other currency pairs.

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