A CFD (Contract for Difference) is a financial product that allows you to speculate on future changes in the market. There are all sorts of CFDs available for the commodities market.

You might take a CFD on the spot price of a commodity, like gold, which is the currently quoted price, or you can choose to trade a CFD based on the gold futures price. Typically, there are standard sizes of contract such as 10 ounces or 100 ounces of gold, and also mini contracts for 1/10 of the standard size. CFD investors never take ownership of the commodity itself.

No matter the kind of CFD you take, or the size of the contract, your return will depend on the change in the value of your chosen commodity. And, as with all CFDs, you can trade on margin, which may be as little as 3% of the value. If you trade on 1:10 leverage, you only need to invest 10% of the asset value. Typically you’ll be charged overnight interest for every day that you hold the CFD as if you had borrowed the money from the broker to buy the full quantity.