L1.4 — Spread, Commission, and the True Cost of Trading Gold

The total transaction cost on a gold trade is the spread plus commission. A 25-pip spread on a 0.1 lot gold position costs $2.50 to enter and effectively $2.50 to exit — $5 total. On a trade risking $10, this represents a 50% overhead on the risk. On a trade targeting $20, this is a 25% overhead. These costs compound across a large number of trades and significantly affect expectancy.

Practical minimum targets for gold: given typical spreads, a minimum risk-to-reward of 1:2 on gold should be non-negotiable. At 1:1, the spread overhead makes the trade marginally negative expectancy even with a 50% win rate. Calculate your total transaction cost for each gold trade before deciding whether the R:R clears the overhead.

Broker choice matters significantly for gold traders. The difference between a 15-pip and a 35-pip spread on gold, over 200 trades per year at 0.1 lot, is $400 in transaction costs. Check your broker's gold spread during London and New York sessions (not just in their marketing materials) and factor it into your minimum target criteria.