CFD in gold trading

A CFD (contract for difference) is an agreement to exchange the difference in an asset’s price between the moment a position is opened and the moment it is closed. Most retail XAUUSD trading is done through CFDs: you never own or take delivery of gold, you simply gain or lose the price change on the contract size you traded.

How it applies to gold trading

A gold CFD typically mirrors 100 troy ounces per lot, is traded on margin, can be bought or sold short with equal ease and carries a daily swap for positions held past the rollover. Costs are the spread, any commission and the swap. Because there is no expiry, a CFD is convenient for short-term trading but can become expensive to hold for months compared with futures or physical gold.

CFDs are regulated differently by country. Some regulators cap leverage for retail clients, require negative balance protection or restrict marketing, and in a few countries CFDs are not available to retail traders at all.

Worked example

Example (hypothetical numbers): you buy 0.20 lots of a gold CFD at 4,000.00 and sell at 4,015.00. Profit is $15 × 100 oz × 0.20 = $300, minus the spread already paid on entry and any commission. Held for three nights at a swap of -$5 per lot per night, the cost is another 3 × $5 × 0.20 = $3.

A common mistake

Treating a CFD as owning gold. It is a leveraged derivative with financing costs and counterparty risk, not a store of physical metal.

See also: XAUUSD, Leverage, Swap and rollover, Paper gold vs physical.

Frequently asked questions