The power of tight spreads in gold trading: A key to efficient market moves

The power of tight spreads in gold trading: A key to efficient market moves

With inflation on the rise, Bitcoin making waves, and global economic policies—particularly trade tariffs—creating uncertainty, gold (XAUUSD) is once again emerging as a safe haven for traders. In times of market volatility, gold has proven to be a reliable store of value. But while gold’s appeal as a stable asset is clear, trading it effectively requires more than just tracking price movements. Trading costs, primarily driven by spreads, are crucial for maximizing profitability.

A long-standing hedge in uncertain times

Gold’s reputation as a hedge against volatility is well-established. Its appeal comes from its scarcity, durability, and the fact that it’s a tangible asset that doesn’t rely on central banks or governments. Unlike fiat currencies, which can be devalued or printed at will, gold's limited supply ensures that it holds value, particularly during economic or political instability.

The relationship between gold and the US dollar is crucial to understanding gold’s market movements, particularly when economic uncertainty rises. Generally, when the dollar weakens, gold strengthens. Here’s why:

Currency dynamics: Since most gold transactions are denominated in US dollars, a weakening dollar makes gold more affordable for international buyers. This increased demand pushes gold prices higher.

Inflation hedge: As inflation rises, the purchasing power of fiat currencies decreases, pushing investors to seek gold as a stable store of value. Gold has historically performed well as a hedge against inflation, especially when central banks raise interest rates to combat rising prices.

Interest rates: When US interest rates are low compared to other countries, holding gold becomes more attractive. With lower returns on dollar-denominated assets, investors are drawn to gold for its relative stability.

In today’s environment, where inflation is a concern for many economies, gold continues to attract attention. Terence Hove, Exness Financial Markets Strategist Consultant, notes, “Gold’s role as a safe haven is growing stronger as traders look for stable assets amid inflation and shifting global policies. With continued market volatility, gold remains essential to a diversified portfolio.”

The impact of tight spreads in gold CFD trading 

In gold CFD trading, spreads—the difference between the buying (ask) and selling (bid) prices—play a major role in the overall cost of each trade. For traders, tighter spreads mean lower transaction costs. This is especially important for those who engage in frequent trading, as even small savings on each trade can add up over time.

Exness, one of the world’s largest retail brokers, recently reduced its spreads on gold CFD trading by 20%*, offering traders a competitive edge. By tightening spreads, traders can enter and exit positions more efficiently, reducing the cost per trade and increasing overall profitability.

Smaller spreads also minimize slippage—the difference between the expected and executed prices—making it easier for traders to execute trades at their desired price. Slippage** in the majority of Exness accounts is less than 2%, whereas it can reach up to 80% with some of Exness’ major competitors. 

Maximizing tight spreads

To fully capitalize on tight spreads, traders need a clear strategy and the right tools. “Choosing a broker with competitive spreads, like Exness, is the first step,” Hove explains. “However, reducing trading costs is only part of the equation. A solid risk management plan and disciplined approach are just as important.”

By adopting a well-thought-out strategy and strong risk management, traders can confidently navigate the gold CFD market. With lower transaction costs and greater efficiency, gold trading becomes even more accessible, allowing traders to capitalize on opportunities with less impact from trading fees.

Gold’s position as a go-to safe haven is unlikely to change, and with tighter spreads, it’s becoming an even more attractive option for traders. By understanding the impact of spreads and how to use them to their advantage, traders can make the most of gold’s stability, even in uncertain times.

* Best spreads refer to average or maximum spreads offered by Exness, excluding agents' commission for XAUUSD during the first two seconds following high-impact news events from January to May 2024, compared to five other large brokers.

**Tested during 2024-09-06 to 2024-09-12 and 2025-01-24 to 2025-01-29, for XAUUSD, on Exness Standard account vs similar accounts in 3 other brokers.