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Can I really spreadbet on the price of Gold?

Bet on Gold
Written by David

Yes, of course – financial spread betting involves speculating on the financial markets and gold is one commodity you can bet on. In a nutshell, you bet on whether the price of gold will head up or down.

Since peaking sometime ago, the gold price has fallen back to around $1700. People tend to take a longer-term view on gold and set their stops wider, as otherwise the short-term setbacks could leave them stopped out. Gold had not previously traded at the $1900-an-ounce mark for some years. A large part of the price rise has been down to the weakness in the dollar, as in times of crisis people view gold as a store of value. Many analysts feel that extent of the twin trade and budget deficits in the US means that the dollar is likely to continue to fall in 2013. People genuinely feel that when the world is such an uncertain place gold represents a sound bet.

So how does the process work in practice? The spread betting provider will provide a prediction or ‘spread’ on where the price of gold will be at a future date. If you believe the price will be higher than the financial bookmaker’s quote, you place a ‘buy’ spread bet, if on the other hand you think it will be lower you place a ‘sell’ spreadbet. If you get the gold market direction right you stand to gain the difference in your winning trade, multiplied by your stake size.

Incidentally, an advantage of dealing in this market is that it is virtually available round-the-clock. Many spread betting providers quote gold at 0.1 basis points per US dollar, which in practice means that for every dollar movement, you would either stand to make or lose 10 times your stake. So if you were to buy £20 worth of points and gold moves up $2, you would stand to make £400 (£20 x 2 x 10). Taking IG Index for instance, it offers both a spot and December future price for Gold. Both contracts trade on a spread of about 1 point presently.

Let’s say Capital Spreads quote on the December Gold contract is 13882 – 13888 (quoted to $0.10).

Opening bet: You believe that the price of gold is set to rise, so you go long (buy) £5 per point at the offer price of 13888.

The price of gold rallies meaning your prediction has been proven right!  You decide to close your spreadbet.

The new Capital Spreads quote is 13997 – 14003.

Closing bet: You sell £5 per point at the new bid price of 13997.

Total profit = (13997 – 13888) x £5 = £545.

Incidentally, with financial spreadbetting your trades are monetised in your base currency as opposed to the underlying market currency – usually in USA dollar for oil so your exposure will always be in sterling (if your spread betting account is denominated in sterling). This make it easier to plan your entry, exit and stop levels than if you had to account for foreign exchange fluctuations.

That must be a definite advantage of spread betting gold in £/pt. If you bet £1/pt and gold rises $1000 you make £1000. Exchange rates don’t even come into the equation.

Do spread betting companies fish for stops on Gold like they do on indices?

Hmm, not really – it is the banks that control the gold market, not the spread betting companies, but nonetheless it is prudent to use wider stops to allow your position room for movement.

About the author


I first cut my teeth in the Square Mile in the winter of 2002. I was young, fresh-faced and straight out of university; keen but maybe a little naïve about the way the investment world really worked… A few years ago I discover a whole new world of opportunity: spread betting on the financial markets.

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