Trading gold and commodities
Gold and other commodities respond to economic conditions, changes in supply and demand, and shifts in market expectations. Building on the previous lesson about central banks and interest rates, this lesson explains their main price drivers, how commodity CFDs work, and how to calculate exposure before considering the risks.
Understanding commodity markets
Commodities are raw materials used in production, energy generation or consumption. Major groups include precious metals such as gold and silver, energy products such as crude oil and natural gas, and agricultural products such as wheat and coffee. Although they share a category, their markets behave differently. A weather forecast may strongly affect wheat prices while having little direct effect on gold.
Trading a commodity CFD means entering a contract based on changes in the price of a reference market; it does not mean taking delivery of metal, oil or grain. The reference may be a spot price or a futures contract. Understanding that reference matters because contract expiry, pricing methods and adjustments can affect the CFD independently of the broad economic story.
What moves gold?
Gold is both a physical commodity and a financial asset. Its price can respond to jewellery demand, mining supply, central-bank purchases and investor positioning. Interest rates are particularly important because gold itself pays no interest. When inflation-adjusted, or real, yields rise, interest-paying assets may become relatively more attractive. However, this relationship is not fixed, and other forces can outweigh it.
Gold is commonly quoted in US dollars. A stronger dollar can make it more expensive for buyers using other currencies, potentially weakening demand. During uncertainty, investors may seek gold as a perceived safe haven, but its price can still fall sharply, including when investors sell assets to raise cash. Economic announcements matter mainly through how their results differ from expectations, not simply whether a headline appears positive or negative.
Supply, demand and futures
For energy and agricultural commodities, physical supply and demand often dominate. Oil prices can react to production decisions, transport disruptions, inventories and expectations for economic growth. Natural gas is sensitive to weather, storage and regional infrastructure. Agricultural prices can respond to rainfall, crop disease and harvest conditions. These drivers can create seasonal patterns, but seasonality is not a reliable prediction of future prices.
Futures markets also reflect the cost and timing of delivery. When later-dated futures cost more than nearer-dated contracts, the curve is called contango; the reverse is backwardation. Storage costs, financing and immediate availability can influence this structure. For a CFD linked to futures, moving from one reference contract to another may involve a rollover or adjustment. Check the product terms rather than assuming that every commodity CFD follows spot prices.
Worked example: gold exposure
Consider a hypothetical gold CFD with a contract size of 100 ounces per standard lot and a quote in US dollars per ounce. A position of 0.10 lots represents 10 ounces. At an entry price of $2,300 per ounce, its notional exposure is 10 × $2,300 = $23,000. If the applicable leverage were 1:100, a simplified initial margin calculation would be $23,000 ÷ 100 = $230.
Suppose this is a buy position and the price rises to $2,315. The gross profit would be 10 × ($2,315 − $2,300) = $150. If the price instead falls to $2,285, the gross loss would be $150. Both figures exclude spreads, financing, commissions where applicable, and currency conversion. Margin is collateral, not a maximum loss: a relatively small price movement can produce a substantial loss compared with the amount initially required.
Checking specifications and risk
On MT5, open the symbol specification to review contract size, minimum volume, volume step, tick size, tick value and trading sessions. Also check applicable margin requirements, financing charges and any expiry details. Do not assume that gold, oil and other commodities use the same lot size or price increment. If the instrument’s profit currency differs from the account currency, exchange-rate conversion also affects the final account result.
Commodity prices can move quickly around inventory reports, central-bank decisions or unexpected supply disruptions. Spreads may widen, and execution may differ from the requested price. Stop-loss orders do not guarantee a particular exit price during gaps or fast markets. Position size determines the monetary effect of each price move; leverage changes the margin required, not that exposure. CFDs are leveraged instruments and carry a high risk of loss.
- Different commodities respond to different economic and physical drivers.
- Gold’s links with real yields and the dollar are not fixed.
- Calculate exposure using contract size, volume and price.
- Check MT5 specifications; margin does not define maximum loss.