Gold Spread Bet | Gold Spread Betting
Major players in the metals markets include speculators and those who actually have a real demand for the commodity in their day-to-day business activity.
For example, in the case of silver, a jewellery manufacturer may want to use the futures market to lock in a price for the metal after receiving a significant order from a major retailer. Imagine the manufacturer has quoted a price for the finished article to the retailer but one of the major cost components of the product will be the actual price of the physical silver in the jewellery. The manufacturer does not want its profit margin ruined by a sudden surge in the price of the commodity. So the manufacturer buys a futures contract to cover this risk.
Gold Spread Betting by Spreadex
Unlike this manufacturer, you will be trading in the hope that the price of the commodity will rise or fall to match your view.
Trading commodities can be exciting, but at the same time risky due to their volatile nature. There are a number of factors that can make the prices of commodity markets move such as geopolitical events, underlying supply and demand, weather conditions, currency fluctuations and investor sentiment.’
Example of a Gold Spread Bet courtesy of Capital Spreads
Your automatic stop loss would be placed at 80% of the maximum CGSL. The maximum CGSL for Gold Sept is 300 (in this case the same as the funds you have available) so the stop loss will be placed at £300 x 80%=£240, which at £1 per point puts it 240 points away, i.e. at 873.6. The margin requirement would be £300 (300 x £1).
You would be able to move your stop loss nearer, which would free up funds and increase your Trading Resources, but you would not be able to move it further away as you have no Trading Resources left.
However, tensions in the Middle East later increase and as a result, traders buy into precious metals as a protection against more poor news.
The price for gold rises higher than your stop loss order at 873.6. The stop loss is therefore triggered and your position is automatically closed:
London Metal Exchange
Some spread betting providers trade the London Metal Exchange. I would like to warn you of some bizarre things that makes the LME a strange beast and will save you a great deal of headaches. Note: Only some use the LME as a strict guide, when you sign up with one of the spread betting companies I outline later – please read their booklet they supply before trading. Don’t worry however, I do point out which Financial Bookmaker is good for beginners, moving up to the more advanced trader.
The LME contracts for none-ferrous metals such as -:
- ALUMINIUM ALLOY
- ALUMINIUM
- COPPER
- LEAD
- NICKEL
- TIN
- ZINC
- NASAAC
They run from 90 consecutive days and not 3-month contracts to which we have become accustomed. This can cause confusion. As when you open a 90-day LME contract then a week later you decided to close by either buying or selling a 90-day contract – you would be opening a new contract and not selling/buying the old one to close.
That is why when trading the LME markets you make a note of the contract date to which you are closing. When you go to close that contract you chose the contract date for which you are closing and not buying/selling to close on a new 90 day contract. Sounds difficult, but only a handful of the professional league Financial Spread Betting firms trade using the LME as a guide. You can get the best data from the horse’s mouth, direct from the LME: http://www.lme.co.uk/dataprices_daily.asp
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