While everyone was waiting for the Bitcoin halving, the first quarter of 2024 brought other developments that further impacted the CFD industry. One of these factors was the rise in gold prices, which attracted attention and increased the activity of retail traders. But can this continue forever, generating permanent profits for CFD brokers?
Despite the huge media hype around cryptocurrencies, CFD industry traders prefer other, more traditional instruments. For example, if we look at the CMC Markets report for 2023, we will see that the most popular instrument category (by revenue) in 2023 was “Index Trading”. However, the second most popular asset class was “commodities”. It represented 22% of revenues, compared to 41% of index trades. While revenue share is not quite the same as volume share, it gives a very good picture of what UK brokers clients choose to trade. Also, gold and silver are not the only financial instruments traded in the “commodities” category, so the mentioned 22% must be divided between gold, silver, and oil at a minimum.
Another European broker, XTB, achieved similar results, but revenue from commodities was even higher. In its 2023 report, we can see that while indices trading was the most popular among XTB clients (47.8% of revenue), the second most popular category, “commodities”, brought in 39.9% of revenue share, which is much larger than in the case of markets. CMC. Either way, CMC Markets and XTB, we could see an improvement in commodity revenues during 2022, which could result from more gold trading in 2023.
More interesting results were recently published by Doo Prime. The global CFD broker's trading volume, with its roots in Hong Kong, reached $95 billion in March of 2024. According to the same data, more than 70% of this volume is attributable to trading in gold (XAU/USD), while only 11 % of trading volume was linked to EUR/USD. “Gold is the most popular asset for Doo Prime clients in March,” Asador Khabian, an analyst at Doo Prime, confirmed to Finance Magnates. It achieved the highest trading volume of $67.11 billion and saw the biggest growth of $22.6 billion or 50.70% compared to February.
Will metal trading bring additional profits to CFD brokers?
We can also agree that metal trading is very popular. However, this will vary from one broker to another, depending on the region in which they operate. Brokers focused on Asia will benefit most from offering CFD trading for metals, while in other regions, such as Europe, it will be less popular. Finally, we have to remember that the current popularity of gold trading is a result of the rally, which is breaking the previous record levels of gold prices. This attracts the attention of retailers. But such a situation will not last forever. Gold itself is not a volatile market and therefore, naturally, does not attract a lot of trading volume.
Get the latest quarterly intelligence report here for the full article and bigger picture on the gold trading phenomenon.
This article was written by Seloster Majewski at www.financemagnates.com.
