FxPro: a contract on the gold price, not a piece of gold

A contract on the gold price, beside a piece that has to be tested, weighed and sold back

When you buy a piece of gold in Nigeria, you receive a physical item. You must test its karat, weigh it, and later find a buyer when you want to sell. The price you pay includes the metal value plus a dealer’s spread and, for jewellery, a making charge. When you sell, you may receive less than the metal value because the buyer deducts a margin.

A contract for difference with FxPro is not a purchase of metal. It is an agreement to exchange the difference between the gold price at opening and the gold price at closing, settled in the account’s currency. No gold is delivered, weighed or stored. The contract carries no claim on any bar or piece of jewellery. Its value tracks the world gold price in dollars, but the account itself holds only a position.

Why karat and making charges have no meaning in a contract that delivers nothing

Karat measures the purity of a physical piece of gold. A 24 karat bar is nearly pure, while 18 karat contains other metals. Making charges are the labour cost of turning metal into jewellery. In a contract for difference, there is no piece, so there is no karat and no making charge. The contract references a standard unit of fine gold, usually the troy ounce, and its price moves with the world market.

A buyer in Nigeria comparing a gold coin to a contract for difference is comparing two different things. The coin has a karat, a weight and a buy-back price. The contract has a price, a spread and a financing cost for holding the position overnight. The contract’s price will not match the naira price of a coin in Lagos, because the coin’s price includes the street dollar rate and a dealer’s margin.

What to read in the terms before an account is opened from Nigeria

Opening an account with FxPro requires identification and takes a day or two. The broker offers a practice account that costs nothing, which lets a reader see how the platform works before committing money. The terms of the account set out the fees, the margin required, and the circumstances in which a position may be closed automatically.

A reader in Nigeria should check whether the account’s currency can be funded from a Nigerian bank, what the deposit and withdrawal methods are, and what charges apply. The terms also state the broker’s regulatory status in the reader’s country, if any. None of that changes the nature of the contract: it is a way to take a position on the gold price, not a way to buy gold.

FxPro is not licensed by the Securities and Exchange Commission of Nigeria. An account is opened with a company regulated outside Nigeria - the group is authorised by the FCA in the United Kingdom and CySEC in Cyprus - so a resident here deals with a foreign firm and the protections of a locally licensed one do not apply. Moving foreign currency for trading is subject to Central Bank of Nigeria foreign exchange rules. Nothing on this site is investment advice.