The value of gold changes from moment to moment, as it is traded in public exchanges where its price is determined by supply and demand. Although people do not eat or drink it, they are drawn to gold. It has been used as currency because it does not corrode, and the material allows for the absorption of some light, creating that yellow shine.
Futures Markets
Gold is traded on a daily basis by speculating on its short-term price movements, and this is done electronically. The actual gold is not physically dealt with, nor is it taken as ownership. Instead, transactions are conducted electronically, and profits or losses are only recorded in the trading account.
There are several ways to trade gold. The primary method is through a futures contract, which is an agreement to buy or sell something – like gold – at a future date. Buying a futures contract for gold does not mean you must physically take possession of the actual material.
Gold Futures
The amount you need in your account to day trade a gold futures contract will depend on your futures broker. For example, NinjaTrader requires you to have $1,000 in your account to open a position for one micro gold futures contract. You also need to have enough in the account to accommodate potential losses.
For day trading a standard gold futures contract (GC), you need $2,000 in your account, along with additional funds to accommodate potential losses. The amount required by your broker to open a day trading position is called “day margin,” and it varies by broker and can change.
Gold Trading, ETFs, and/or Stocks
Another way to day trade gold is through an exchange-traded fund (ETF), such as SPDR Gold Trust (GLD). If you have a stock trading account, you can trade price movements in gold.
The fund holds gold as reserves, and thus its value reflects the price of gold. The price of SPDR Gold Trust is approximately equal to 1/10 of the price of gold. So if gold contracts are trading at $1,500, the price of the fund would be trading at around $150.
The fund trades like any stock. The smallest price movement is $0.01, so you earn or lose $0.01 for each share you own every time the price changes by one cent. Stocks and ETFs are typically traded in blocks of 100 shares (referred to as “round lots”), so if the price changes by one cent, and you hold 100 shares, you would earn or lose one dollar.
If the price changes by one dollar, from $120 to $121, you would earn or lose $100 on a position of 100 shares. If you hold 500 shares, you would earn or lose $500 on the same price movement. The amount you need in your account to day trade an exchange-traded fund for gold depends on the price of the fund, leverage, and your position size.
For day trading stocks or ETFs in the U.S., you are required to have a minimum balance of $25,000 in your account. Depending on how much income you want to generate and your leverage, you may want to have more than $25,000 available to you.
Frequently Asked Questions (FAQs)
What is “spot gold” in trading?
“Spot gold” is another way to refer to the current price of a security. When traders talk about the “spot gold price,” they are referring to the price it would cost to purchase an ounce of gold at that moment theoretically. This differs from the price of products that track gold, such as futures, ETFs, and options.
What
What is the gold trading price today?
The price of gold changes throughout the day, so the price published today may not be accurate tomorrow. A trading broker will provide you with access to the gold price as well as charting software to study price movements. There are also third-party charting software options.
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Sources:
CME Group. “Gold Futures Contract Specs.”
CME Group. “Micro Gold Futures Contract Specs.”
NinjaTrader. “CME Group Products,” Page 2.
SPDR Gold Shares. “Key Information.”
FINRA. “Day-Trading Margin Requirements: Know the Rules.”
Source: https://www.thebalancemoney.com/how-to-start-day-trading-gold-1031364
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