Totality guide: how to trade gold

If you are considering trading gold for the first time, a good place to start are the factors that drive the precious metal's price. 

1. Monetary policy: The policies of the US Federal Reserve, including interest rates and inflation targets, influence gold prices. As gold does not yield interest, rising interest rates increase the opportunity cost of holding gold, often leading asset managers to reduce their exposure to real assets. 

2. Currency fluctuations: Gold prices typically exhibit an inverse relationship with the value of the US dollar. A weaker dollar tends to drive gold prices higher, and conversely, a stronger dollar can suppress gold prices. 

3. Real bond yields: As discussed above, gold prices often move inversely to interest rates, as rising rates increase the opportunity cost of holding non-interest-bearing assets like gold. 

4. Central bank demand: Several central banks have been acquiring gold in recent years to diversify reserves away from reliance on the US dollar. Additionally, gold's lack of credit or counterparty risk makes it a trusted reserve asset. 

5. Geopolitical tensions: Gold is considered a safe-haven asset, sought by investors during times of geopolitical uncertainty or crisis due to its intrinsic value and perceived stability. 

6. Speculative activity: Hedge funds and speculators often anticipate and amplify price movements in gold markets based on fundamental and momentum-driven factors. 

So how can you actually trade this precious metal? Here are a few ways. 

1. Physical gold: Purchasing physical gold in the form of jewellery, coins, or bars provides direct exposure to the metal, but involves considerations such as storage, insurance, and higher trading costs. 

2. Gold ETFs/ETCs: Exchange-traded funds or commodities offer a convenient way to invest in gold without holding physical metal. These products track gold prices closely and can be traded easily on exchanges. 

3. Gold mining stocks/ETFs: Investing in gold mining companies or ETFs that hold a basket of gold mining stocks provides exposure to gold prices. However, these mining companies carry operational risks and may exhibit higher volatility compared to gold. 

4. Gold futures, CFDs, and options: Trading gold futures, contracts for difference (CFDs), or options involves higher risk due to leverage. While these products offer opportunities for speculation, they also require careful risk management to mitigate potential losses. 

5. Spot gold trading: Another leveraged product that may suit traders using risk management tools. At Totality, you can use leverage to trade on the price of gold against 12 different currencies, including the US dollar and Australian dollar.   

All investors dipping their toes into trading gold must first consider their tolerance for risk, time horizon, and personal financial goals. Gold is considered a relatively safe precious metal to invest in, but the price still responds to changes in other markets, such as the US dollar and government bond yields.