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The Definitive Precious Metal Trading Guide

xau/usd, metals trading, trading gold, silver trading
author Written by
Rex John Walsh
author Fact checked by
Sangram Mohanta

Last Updated on June 3, 2024 by TOP FOREX BROKERS REVIEW

Whenever you see the XAU/USD, always know that it is the symbol for gold as traded against the United States Dollar. However, before we get into metals trading or trading gold and silver trading let’s ease into the subject.

We will also talk about silver trading and a little bit about Platinum trading. For a long time, gold and silver have held the status of precious metals. They are highly coveted even today. Metals trading is usually part of the portfolio of a good investor.

Which precious metal is best for investment, though? Why are they so volatile?

Well, we will answer all these questions in a short while. There are several ways you dive into metals trading so you can start trading gold, silver, or platinum. There are also many reasons why you should join the treasure hunt.

Metals trading happens on almost all the online platforms, but the XAU/USD pair is particularly favored. Silver trading and gold trading are at the forefront of this. That is why you should get the best forex broker, by reading out forex broker reviews.

They will allow you to pick the best forex broker and get a platform that will enable you to do all this.

In modern times, metals trading is a way to store wealth. Gold is well known as a haven and, together with silver, are used in the pharmaceutical industry to make compounds like silver nitrate. It is also used in other sectors, such as the making of smartphone components.

If you are new to the metals trading world, read on and learn how they work and how you can start getting into the market.

Understanding the Contract Specifications

Metals trading particulars are known as contract specifications. You will encounter the following features when you trade gold or silver as CFDs. We think you should know about them beforehand so that you do not get lost in the details.


Usually, gold and silver are traded as pairings with fiat currencies. Often, it's the USD. The symbols use din metals trading for both silver and gold, are derived from the Latin names. Aurum is the name for gold, and Argentum is the name for silver.

The symbols, therefore, become XAU for Gold and XAD for silver. Their pairings with the dollar become XAU/USD and XAG/USD.

The Metals trading Hours

Gold, silver, and other metals trading activities, categorize these precious metals as commodities—the commodity markets trade from Monday to Friday. There is usually a one-hour break period every day.

So, you can trade XAU/USD and other pairings, between 2200 hours UTC and 2100 UTC, every day. The break happens around 2100 UTC and 2200 UTC. During the break, you cannot place or amend orders.

Contract Duration

Contracts on silver and gold do not expire. There is no way to get an automatic settlement or rollover of any open agreements. Other commodities have expiration dates. Take the example of oil and agricultural products. They have expiry dates for a reason. When metals trading, there is no such thing.

The Margin

The European Securities and Markets Authority (ESMA), set new rules on margin requirements for trading. This has changed the landscape of metals trading in the European markets. If you pick a European broker from our forex broker reviews, you will find that you have trade with increased margin requirements.

Leverage for trading gold is now reduced to 20:1. The margin requirements have been raised to 5%. So, where you would need $100 to set up the mini-lot position for metals trading, now you have to have $500.

Brokerages with UK and Europe divisions now have an option where a trader can use a migrated account for gold or silver trading. The migrated accounts operate out of places where the leverage is 100:1 or 200:1.

The Trading Conditions

Here are some additional things you should know:

  • Understand some aspects of trading gold and silver, concerning the active positions.
  • Know the value of 1 tick. It may vary from one platform to the next. The average is usually $10 per the Standard Lot for trading gold and $50 per Standard Lot when silver trading.
  • The minimum contract size is usually ten units per contract, except otherwise stated by the broker.
  • The value of a lot size is set at 1,000 ounces for trading gold and at 5,000 ounces for silver trading.
  • The minimum pip fluctuation for the two metals trading (silver and gold), is 3-10 pips for each tick movement.
  • The spread of metals trading can be extensive. It could be as high as 70 pips when it comes to trading gold and 50 pips for silver trading.

Now that we have all that settled let's get into the other essential details.

The Factors That Move Prices of Gold and Silver ( XAU/USD)

Metals trading needs you to understand the fundamentals that govern the price movements. Gold tends to react to the economic and political stress, the value of the US dollar (because of the close relationship), interest rate policies as dictated by central banks and inflation (which affects interest rates).

Silver, on the other hand, has industrial use and operates under different fundamentals. It does not have as close a relationship with the US dollar as the XAU/USD pair does.

In general terms, gold is considered a haven, and that is why you will see a rise in demand when there is a risk in the financial markets. When people are thinking about capital preservation, that's when gold thrives.

Gold buying and trading of the XAU/USD pair increases when there are terrible bearish runs in the market for entire economies. Take, for example, the European sovereign debt crisis and the years that followed it.

Gold was selling in high amounts as Greece, Ireland, and Spain dealt with a severe financial crisis.

Central Banks Monetary Policy

When it comes to metals trading, you will need to know that Central Banks' monetary policy usually hinges on the control of inflation through the use of interest rates. The relationship between gold and interest rates is inverse.

Higher interest rates affect the returns on investments made using fixed income methods, like treasury bills.

The higher interest rates, spur a sentiment of risk on. That, in turn, leads the investment capitalists to find riskier assets, hoping they can make returns. So, the traders exit old trading positions and take these new positions.

When there are years of quantitative easing, you will get more bets that the interest rates will go up.

The XAU/USD Relationship

The XAU/USD pair has an inverse relationship as well. When doing metals trading, you will notice that not even silver trading, has the kind of relationship that the XAU/USD pair has. So, if we have a stronger dollar, which leads to a hike in interest rates, among other factors, you will see weaker gold prices.

If the dollar loses strength, people tend to rush into trading gold, for their dollars, for capital preservation and, as a haven. Understand that the XAU/USD relationship guarantees that one will almost always affect the other.

How To Trade Gold and Silver

You can trade gold as a CFD asset , on an online platform. Or, you can trade them indirectly by trading stocks of companies that mine the metals. You can also do metals trading by exchanging trade funds that have a high component of silver or gold in their weight.

We recommend that you trade the XAU/USD or XAG/USD pairs. This will mean that you need to have a good command of the fundamentals of gold and silver prices. It also depends on your knowledge on how to take new positions or exit the market.

For this chart, we are looking at the XAU/USD pair for a year. If you know how to read these patterns as we showed you in our forex education section, you should have no problem knowing where the price will go.

You will need to be able to use the techniques that we teach, of how to read charts so that you can make the best of information like this. Following the patterns on charts when doing XAU/USD trading or XAG/USD trading, will change the accuracy of your results.

Pro Tips:

  • Adhere to the 2% risk management rule
  • Pick the entries that have a minimum reward-risk ratio of 3:1

The metals trading industry is one where gold and silver respond well when you use technical analysis, but only when the fundamentals have determined the overall direction of the market. Never forget what underlies the gold and silver.

If you know what moves them, then you have a good chance of knowing when the prices will change and by how much. The XAU/USD pair may be elusive in a way, but you can master it with practice and repeated exposure to how the whole thing works.

Here’s How You Fill Up Your Chamber of Treasures

So, you want to get into metals trading. How do you do it? Here are the options you can go with, aside from outright XAU/USD pair trading.

Commodity ETFs

In metals trading, you will find exchange-traded funds for Gold, Silver, and Platinum. The best thing about ETFs is that they have liquidity and are convenient as a way to buy and sell gold, silver, or platinum.

ETFs, do not offer access to the commodity itself, and so, you cannot have any claim to the metal in the funds. No silver coins or gold bars for you.

Common Stocks and Mutual Funds

With this method of metals trading, the shares of precious metals miners are leveraged to the price movement in the metals. Unless you know how mining stocks are valued, it is wiser to just stick with funds where reliable performance records show what to expect.

Futures and Options

In the futures and options market, you will get liquidity and leverage, if you want to make big bets on the metals trading industry. However, the derivative products of the metals, have potentially significant losses and also great wins.


Precious metal bars and coins are strictly for the people who have a safe place to put them. For those who are expecting doomsday scenarios where paper money burns in the streets, this is your option. The only thing about bullion that is not convenient is, getting the security for it and the fact that it is cumbersome to hold or carry. Plus, it is illiquid.


With certificates, as an investor, you can get all the benefits of owning physical gold without dealing with transporting or storing precious metals.  However, if you are looking for anything of value when real disaster strikes, do not expect anyone to take your paper certificates in exchange for anything of value.

You will be burning yours, right alongside the paper money people when the apocalypse begins.

Will Precious Metals Come Through for You?

Precious metals have a unique way of protecting people from inflation. They have intrinsic value that is tied to their physical property, unlike paper money or certificates. They do not have credit risk and cannot be inflated.

Simply put, they are what they are. You cannot print more of them. They also have insurance against upheavals of a political or financial nature.

As an investor, look at it this way. Precious metals provide a low or negative correlation to other assets like bonds or stocks. This means that a small percentage of precious metals in your portfolio dramatically reduces the volatility and risk you carry.

Precious Metals Risks

No investment does not carry a risk. Precious metals may bring a certain kind of security during some crises, but they carry with them some risk. Their prices can drop when there is economic certainty.

For people who like to invest heavily in trading gold or the XAU/USD pairs and others, this can be a blow to your earnings. Selling can also be a challenge when volatility is introduced. The prices tend to shoot up quite high.

Finding a buyer who will purchase the physical metals from you can be hard. Another risk to the precious metals’ prices is supply. When the demand goes up, the existing supply can get depleted quickly.

That means that the producers will have to bring more of each metal into the market. In the case where there is a short supply of mineable minerals, the pressure on prices begins to mount.

The Bottom Line

With precious metals, you get an easy and effective way to diversify your portfolio. Trading the XAU/USD or XAG/USD pairs can be beneficial if the timing is right, and you know what you are doing.

Trading gold takes time and practice to master, but thee fundamentals and analyses are mostly the same. Silver trading may have different fundamentals from gold, but you can learn them and employ them to make great trades.

To get a great platform, read our forex broker reviews to find the best forex broker for you.

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