In fact, the amended law gave brokerage companies access to exchange transactions in gold and silver using the technical capabilities of the foreign exchange market based on MOEX. Now most individuals and legal entities can make transactions with precious metals using a brokerage account. Next, we will tell you what you need to know to successfully trade gold and silver using the capabilities of the Moscow Exchange.
How do exchange trading in precious metals differ from buying bars, coins and opening compulsory medical insurance?
For what reason is it better to trade precious metals through an exchange rather than buying and selling at a bank in the form of investment coins and bars? Here are some undeniable advantages of the spot market:
- Convenience of making transactions using an online trading platform. There is no need to personally go somewhere, travel, sign papers, etc.
- Much smaller difference between the purchase price and the sale price than in banks, due to competition between participants in exchange trading.
- A single brokerage account allows you to combine transactions with precious metals and investments in other assets traded on the Moscow Exchange, and use the same collateral for all contracts. The precious metal itself can be such collateral.
- Access to the use of leverage when making transactions.
- Conducting trading operations without coverage.
Strategies for trading gold
Gold trading is traditionally based on a combination of technical and fundamental analysis. Together, they cover the main factors influencing quotes, allowing you to find the optimal moments to buy or sell metal. Here are some strategies you can use:
Trading using Fibonacci levels
This strategy uses the technical indicator Fibonacci levels. It is suitable for assets with high liquidity and large volumes, which characterizes gold. Fibonacci levels are support/resistance levels. Trading opportunities arise, for example, on a pullback or continuation of a trend.
Macroeconomic news
To trade gold, it helps to gain a basic understanding of the political and economic sphere. In addition, it is important to monitor current events in the world, especially in developed countries. To make their task easier, traders are provided with an economic calendar, which indicates the time of release of important economic news. The following indicators have the greatest impact on the gold rate:
- Meetings of the Central Bank on interest rates, especially the American regulator;
- GDP growth;
- Growth in the consumer price index (CPI);
- Non-Farm Payrolls indicator and other labor market reports;
- Net volume of speculative positions in gold.
You can track these events through the economic calendar.
Important! Working with gold is based on the rules of market trading known to everyone. However, this asset has a number of features that need to be taken into account when deciding to trade XAUUSD. We are talking, in particular, about the size of the deposit, which should be very significant. In all other respects, normal trading practices should be followed.
Purpose of spot trading in precious metals
Precious metals are bought and sold on the Moscow Exchange in rubles. Purchased precious metals allow you to protect existing cash savings from depreciation and devaluation. With the help of these protective assets, you can also diversify your investment portfolio, compensating for risks and possible losses during a crisis.
The inclusion of precious metals in the investment portfolio provides the following advantages:
- Long-term compensation for inflation risks.
- Reliable diversification of the investment portfolio.
- Reducing losses during market instability.
- Providing liquidity without lending.
- Increasing the overall return on investment.
Experts advise forming an investment portfolio that includes from 5% to 15% of precious metals in the total composition of assets.
Gold market analysis – realities and prospects
The state of the gold market at the moment is characterized by moderate pressure from the central banks of leading countries on the value of this asset. The most significant factor in the fluctuation will remain the financial policy of the United States, as the largest holder of gold and foreign exchange reserves.
However, in the near future, the rapidly developing economies of countries such as India and China will have a significant impact on the state of the global gold market. Today, active research is underway related to the possibility of mining this precious metal in the World Ocean. If the experiments carried out are crowned with success, then the reserves explored on land can significantly increase with richer deposits in the ocean depths. Accordingly, the price of gold will begin to decline, which will lead to increased activity by private investors focused on long-term investments. However, positive results from such research may not appear until 2021.
According to analysts, the gold market in 2021 will continue the upward trend in the value of the international currency asset. If the US dollar weakens, attention to the main “yellow metal” will inevitably increase. So in the near future, the main currency of our civilization will retain and increase its absolute value.
What are the benefits of purchasing gold and silver through the Moscow Exchange?
Purchasing gold and silver through an exchange is always more profitable than through a bank. Exchange commissions when selling gold are about 0.015%, when buying - 1 ruble for any amount of the precious metal purchased. Commission payments to a brokerage firm can amount to thousandths of a percent of the contract value, taking into account the tariffs specified in the agreement with the broker. The costs of paying value added tax, capital management and holding assets when purchasing precious metals on an exchange are usually zero.
In addition, gold and silver are sold on the stock exchange in any volume and on almost any day due to the participation in trading of a large number of manufacturing companies and credit organizations.
How to trade gold in 3 quick steps:
Follow these three simple steps if you want to start trading gold:
Step 1. Open a trading account
Open a free trading account with our recommended broker. As part of the registration process, you will be required to provide your personal details for KYC.
Step 2: Deposit Funds
Once you have completed registration and your account has been approved, you can transfer funds to your account using one of the provided payment methods.
Step 3: Demo and live trading
Start trading on a demo account. A demo account allows you to trade in real time and also learn about the mechanics of gold trading and understand the basic terms.
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Procedure for purchasing precious metals
Transactions with precious metals on the Moscow Exchange are concluded in the currency section. The contract deadline is the next day. For direct trading, a personal account is used on the website of the brokerage firm with which the investor works, or special software.
The purchase and sale of gold and silver lasts from 10.00 am to 23.50 at night. Contracts must be completed by 20:00 pm.
A long trading session allows you to cover the period of operation of Asian and European exchanges, which is extremely important, as it makes it possible to take into account the price dynamics of foreign precious metals exchanges when making large transactions.
US futures market (COMEX).
Despite London's leading role in the physical market, the COMEX derivatives exchange, run by CME Group, is becoming an increasingly important venue for price discovery. Trading activity on the COMEX primarily focuses on the “active month” (nearest date) contract, which acts as a proxy for the spot price. Only a small number of contracts physically settle for delivery of bullion into COMEX vaults, but the market is nonetheless closely linked to the physical markets through a very active exchange-for-physical (EFP) market.
Notably, an ever-increasing share of COMEX volume is traded during Asian market hours, demonstrating the exchange's success in capitalizing on Asian market growth.
How do spot trading in gold and silver differ from futures trading?
Exchange trades in precious metals are more suitable for long-term investing than futures due to the lack of expiration dates. After purchasing a precious metal through an exchange, it can be stored indefinitely.
Spot contracts are not tied to a global benchmark. They show the state of the developing domestic market for gold and silver in Russia, characterizing domestic supply and demand. However, pricing takes place here taking into account the international cost of precious metals, established in London. If prices on different exchange platforms differ greatly from London prices, then appropriate arbitration is carried out to restore balance.
Other differences with futures are that exchange trades in gold and silver do not come with a forward interest rate, guarantee or expiration date. Tariffs for brokerage firm services also vary.
By successfully combining exchange transactions with futures for precious metals, you can achieve a greater level of hedging and use various strategic investment schemes.
FAQ
When is the best time to trade gold?
If you plan to apply a full trading day, then the best time to trade gold is from 7:00 to 17:00 GMT. Thus, you can trade both in the European session and in the American one.
What is the market symbol for gold?
The accepted symbol for gold is XAU for the spot market and for the futures market the accepted symbol is COMEX GC (Chicago Mercantile Exchange) and ZGH for the London International Exchange.
What are the main factors influencing gold prices?
Gold prices are influenced by many factors such as economic data, uncertainty, inflation/deflation, global monetary policy, gold mining (supply and demand), economic crisis and geopolitical tensions.
How much money do I need to trade gold?
The minimum amount required to open a gold futures contract (GC) is $1,000. It is advisable to keep additional funds in your account in case of unexpected collateral calls. For a Gold CFD contract, the minimum requirement for a trading account with eToro is $200.
Clearing operations
The currency exchange and the precious metals exchange use a common clearing mechanism and joint risk management. Failure to perform under contracts is governed by general rules.
When entering into any partially collateralized contracts and using updated or existing settlement codes, the client has the right to use the general ruble collateral provided by the brokerage firm and the exchange.
In the domestic domestic market of gold and silver, the role of the main counterparty and clearing operations was assumed by the organization NPO NCC, part of the association. At the same time, the taken into account risk coefficient for exchange and over-the-counter transactions reaches 5%, and not 20%.
Receiving precious metals purchased on the exchange
Spot precious metal trading on the exchange allows you to deposit and receive physical gold and silver. Based on the results of trading sessions, the metal asset located in the exchange storage facility in the required quantity is entered into the trader’s TBS (trading bank account), which is opened at NCC.
The deposit or receipt of precious metals by the trading participant is carried out using a correspondent account, through an authorized Moscow storage facility. For brokerage clients, this procedure is determined by contractual agreements.
Withdrawing gold and silver from the exchange involves what are called storage costs. At the same time, the quality and liquidity indicators of the gold precious metal may be lower than stated. The standardized bars issued by the vault usually weigh from 11 to 13 kilograms or 1 kilogram.
Jewelry gold market
Trade in gold jewelry, accessories and souvenirs has always been considered a profitable business. Currently, the jewelry industry using this precious metal accounts for about 58% of the total consumption of mined and processed gold. Particular activity is observed in the acceptance of scrap gold, which can bring up to 500% profit to professional jewelers.
Other tax features of exchange trading in gold and silver
Trading operations with precious metals are associated with another tax for a private individual - personal income tax. It is 13%. In this case, the brokerage company is not a tax agent, as happens when selling securities, but only prepares the documents required for filing a declaration in accordance with Form 3 of personal income tax.
If you own gold or silver for more than three years, you have the right to a property deduction with an exemption from personal income tax.
The rules for the sale of precious metal from bank accounts, provided for by Russian tax legislation, are identical to those used for the sale of other material assets.
What to expect from the gold and silver market in the future?
In Russia, the precious metals market is in its formation stage. Therefore, we should expect favorable innovations in the future. Thus, from the beginning of 2021, access to transactions with gold and silver through IIS has been opened. The change became possible after amendments made to the Federal Legislation.
Currently, discussions are underway on amendments to pension legislation that will allow pension funds to invest available money in precious metals.
What are the benefits of a portfolio containing gold or silver?
The 2021 coronavirus crisis once again confirmed that investing in gold and silver is necessary. In the period from July to September, the demand for shares of exchange-traded investment fund structures operating in gold metal increased by 12% compared to 2021 figures. The increase in global demand for investment gold or silver coins and bars amounted to 62.5%.
Investing money in such a protective asset as precious metals has allowed many to save and even increase their savings. By the end of autumn 2021, the dollar price of silver rose by 36.4%, and the gold precious metal by 23.4%.
Investments in precious metals bring maximum income if they are designed for the long term. In the 70s of the last century, gold cost about $40 per ounce. In 2021, its price rose above $2,000 USD per ounce. Even if we don’t take a period of half a century, but consider the last decade, gold has risen in price by 81%, and silver by 36% in dollar equivalent.
By the end of autumn last year, the ruble price of gold increased by 51%, and silver by 69%. This confirms the anti-crisis properties of precious metals as the most reliable protective asset that saves savings from inflation.
Spot trading precious metals is an exciting, intelligent process. It can be both a means of earning money and a gambling hobby. The necessary training materials for this type of activity, as well as all the required information, including current quotes, forecasts and analytics, are publicly available today.
Gold as a means of paying debts
Almost all countries pay each other with physical gold bars. The same goods are used to pay indemnities imposed on states that lost in military conflicts. Part of the gold reserves of a country with an unstable political situation or under threat of invasion may be deposited in foreign banks, for example, in Switzerland.
Central banks of developed countries are trying to constantly replenish gold and foreign exchange reserves precisely in case of such mutual settlements and critical situations. While the value of any currency can be questioned, gold can always be considered as a universal means of payment.
Today, the United States has a gold reserve of more than 8,000 tons, the leading countries of the European Union - about 9,000 tons, Russia - almost 2,000 tons. The total volume of gold and foreign exchange reserves on the world market in 2021 amounted to approximately 33,000 tons.
