What to choose: CFD contracts or gold futures

Economic and geopolitical instability is causing more and more people to invest in precious metals.

Gold bars are extremely popular, while at the same time many investors prefer to buy gold on the stock exchange.

Buying precious metal on the exchange is much more profitable and easier than dealing with physical bullion; you invest in gold because you don’t have to think about how to ensure the safety of the bullion.

But when trading the exchange asset XAU/USD, the question arises: which option to choose: standard futures or contracts for difference?

Type of contract for long-term investment in gold

What is the difference between classic futures and contracts for difference CFDs, since both options are used in the trader’s trading platform?

Futures – have a limited contract lifetime, usually a month or a quarter, leverage rarely exceeds 1:5.

CFD contracts – the transaction period is not limited, the leverage for precious metals is usually 1:100, there are more options for choosing transaction volumes.

That is, due to the limited life of the contract, futures are absolutely not suitable for long-term investments.

Gold usually rises in price over the long term, but despite the upward trend, price drops can also occur.

As a result, a situation often arises in which you open a futures contract for gold, and during the life of the contract the price falls and expiration occurs at a price that is unfavorable for you. In the same case, if a contract for difference had been used, this situation would not have happened, and you could sell the gold even after a year at the most favorable price.

Perhaps gold futures are suitable for intraday trading?

Yes, futures contracts are quite suitable for short-term trading, since when trading intraday you need to pay attention to the expiration dates of the contract.

But this also has its drawbacks; due to the small leverage, you won’t be able to use scalping on gold ; you simply won’t be able to earn much with just your own money.

Due to the greater versatility and practicality of contracts for difference, they have practically replaced standard futures from speculative trading.

Today you can open gold transactions using CFDs with brokers such as Alpari and Roboforex .