Spread Betting and the Gold Markets
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Gold has broken through to yet another record high. The previous high of $1226 per troy ounce was set in November 2009. Since then the gold market has dropped as low as $1044. We are now in the middle of 2010 and gold is trading $20 higher than its previous record level.
In an almost contrarian view to the Euro, it is the bears who are looking a touch green about the gills, especially as a strengthening Dollar has normally been associated with a weakening gold price.
The reason the ‘strong dollar = weak gold price’ equation is not currently working is probably due to the debt problems in Europe and Japan. As Simon Denham of Capital Spreads said, “While the markets look vulnerable, gold will maintain its safe haven role. I have to admit that the response of the Central banks and the IMF to the Southern European debt problems is almost guaranteed to ensure continued volatility in world markets.
“Looking at the longer term chart, the bull-run for gold still looks healthy but the higher it gets the more prone it will become to sharp corrections to the downside. Buying at these levels now requires quite deep pockets, certainly if you want to buy the physical variation”.
Having said that, you don’t have to buy gold to speculate on it. One particular type of financial trading, namely financial spread betting, has a range of attractive features and is worth investigating further.
The simple breadth of markets makes financial spread betting an interesting investment option. Spread betting companies tend to offer thousands of markets from UK and US Stocks to Sugar, Oil, Gold and Dollar / Yen rates.
Also, with gold spread betting, investors can go long or short of the market. If they feel the gold market will go up they will 'go long' or speculate on the price to go up. Likewise, if an investor feels the gold market will go down then they will 'go short' and speculate on the price to go down.
Of course, as with all investments such as trading shares, funds, pensions, housing etc, you can lose money. With spread betting you can lose more than your initial investment.
So why would an investor trade if there is a risk of losing money? Well we have already outlined a couple of useful options and it is interesting to note that with this type of trading your losses can be limited. Some firms let you use a Guaranteed Stop Loss which works as an automatic request to close your trade if your position moves against you by a set amount. In addition, the Guaranteed Stop Loss does not close a profitable trade.
Also the 24-hour trading that some companies like paddypowertrader and FinancialSpreads.com offer provides interesting opportunities. The underlying markets may be closed but you can still trade markets like Gold, Crude Oil, the FTSE and Euro/Dollar rate from Sunday night all the way through to Friday.
Before you consider investing though, note that spread betting carries a high level of risk to your capital. Please ensure that spread betting matches your investment objectives. Make sure you familiarise yourself with the risks. If necessary, seek independent advice.
Spread Betting Comparison - Commodities Markets
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| Gold Daily - Spread Size |
4 |
5 |
5 |
4 |
4 |
5 |
4 |
4 |
| Gold Daily - Min Stake |
£1 |
$0.60 |
£1 |
£1 |
£0.1 |
£1 |
£1 |
£1 |
| Gold Future - Spread Size |
6 |
8 |
6 |
6 |
6 |
7 |
6 |
6 |
| Gold Future - Min Stake |
£1 |
$0.60 |
£1 |
£1 |
£0.1 |
£1 |
£1 |
£1 |
| Brent Crude Daily - Spread Size |
5† |
6† |
5 |
5† |
4 |
5† |
5† |
5† |
| Brent Crude Daily - Min Stake |
£1 |
$2 |
£1 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
| Brent Crude Future - Spread Size |
5 |
6 |
6 |
5 |
6 |
5 |
5 |
5 |
| Brent Crude Future - Min Stake |
£1 |
$2 |
£1 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
| US Crude Oil Daily - Spread Size |
5† |
4 |
5 |
5† |
4 |
5† |
5† |
5† |
| US Crude Oil Daily - Min Stake |
£1 |
$0.70 |
£1 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
| US Crude Oil Future - Spread Size |
5 |
6 |
6 |
5 |
6 |
5 |
5 |
5 |
| US Crude Oil Future - Min Stake |
£1 |
$2 |
£1 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
Comparison Notes
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
Article provided / approved by Financial Spreads which is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 182110.
'Spread Betting and the Gold Markets' edited by DB, updated 19-May-10
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