: What are the common arbitrage strategies for trading Gold? As the title states, will like to know more about what arbitrage strategies are commonly used for gold traders.

Vote Up Vote Down   0 Reactions

Login to give Reaction!

Without getting to deep into the quant stuff, a very common type of arbitrage trade used for gold is statistical arbitrage. This involves the purchase and sale of two tranches of correlated assets. For example, if the the price spread between gold and silver is very wide compared to where it is statistically, where gold is higher than silver, we can sell gold and buy silver. In this case, since the two assets are correlated, if their prices fall, we are hedged by the gold position. If the prices rise, we are hedged by the silver position. We make money when the spread converges to the standard distance.

If you are interested in learning more, research pairs trading, statistical arbitrage, cointegration, correlation, ect.