How to trade gold: Instruction for beginners (Part 3)

CFD on Gold
Gold CFDs are your opportunity to trade gold without owning a physical asset. Even if you do not own a single ounce, you can make money. Most of today's forex broker platforms have the ability to trade CFDs on gold. This is usually a repetition of futures quotes for this asset.

Pros:
1. Small Transaction Costs.
Transaction costs for trading gold contracts will be less than for physical gold transactions.

2. Liquidity
CFDs on gold have high liquidity. This indicates that you can buy these contracts and sell them without losing your budget.

3. Diversification
These assets can be used to diversify your investment portfolio. For traders, this is an opportunity to access the gold market without owning a physical asset.

4. Tax benefits
As with other derivative financial instruments, there are tax benefits for trading gold contracts. You will not pay taxes on your initial investment, but solely on your profits.

5. A Hedging Tool
Gold contracts can be used for hedging purposes to reduce the risks to your investment portfolio.

Cons:
1. High Risks
Gold contracts are a high-risk instrument like other CFDs. The value of gold can go both up and down, changing the value of the contract.

2. A small selection
There are not as many gold contracts as one would like. This means that it is not always possible to find the best CFD.

3. Lack of control
If you trade gold CFDs, you are giving up control of your assets to a brokerage organization. In some cases, you won't be able to withdraw your funds when you want to.

4. Large commissions
Most brokerage organizations charge high management fees when trading gold-based CFDs. Accordingly, you will get less return on your investment.

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Follow our updates for useful information in our series of articles. You can also visit our previous article to better understand this topic.