Gold: The Currency of Last Resort

We always hear the question: “What is Advanced Markets’ spread in USD?” According to LeapRate, it is a spread that depends upon the conditions of the market. Advanced Markets, a true STP Prime of Prime, provides liquidity from top tier, global banks. The average EURUSD spread is normally within 0.3-0.5.

Gold & Forex Brokerage

Gold can give a brokerage or Fund Manager more than what the EURUSD spread will when we talk about future revenues. Most people notice the EURUSD first because brokers market their “tight” EURUSD spread for them to attract more clients. However, as soon as these clients came in, they would pile on their markups along with other pairs of their offerings.

We all know that Gold and the US Dollar are considered as the safe havens during times of global financial crisis. But, between the two, Gold is still the best choice against uncertainty. In the eyes of many people, gold represents confidence play compared to the less certain US Dollar and the “flawed” Euro.

Spot Gold, for instance, has a 100 ounce per lot contract size and 0.01 ($1 per lot) increments. Gold remained low for the past 5 years as the dollar rose and predictions of higher US interest rates further curb the “appeal” of bullion. However, if you look at the market in the past week, you’d notice how fast sentiments may change and how Gold will always be the beneficiary of financial upheaval. It will still be the currency of last resort.

Advanced Markets’ Offering

Advance Markets’ offer Gold spread that is within single digits ad high teens, having 1,000 to 2,000 ounces of liquidity on the bid and offer. But, most of the retail brokerages would offer wider spreads to compensate for operating expenses and to generate extra P&L.

The revenue potential of brokers who are giving mark-ups on their offers using Gold is vital. Take for example: EURUSD and Gold will always have the same value per tick; but, the ability to markup the EURUSD spread varies according to market competitiveness. In general, EURUSD has a markup cap of a few decimals to 1 pip.

Gold Spreads are usually found at 50 cents wide, with a 35 cents net markup over its liquidity. The Advance Markets’ firm emphasizes that they aren’t advocating for excessive markup prices and that commissions and markups proposed by brokers are always subject to their approval.

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