“In recent years, the price of gold has been on the rise, and we have maintained the same spread levels since 2019,” Exness’ CTO Igor Desyatov told Finance Magnates in a recent interview.

“On our Standard account, the spread was 20 cents more than 95% of the time, even though the price of gold had doubled during that period,” he explained. “This naturally increased trading volumes in gold, making the transaction costs relatively tight.”

Exness reduced its spreads on gold and oil, two of the most popular commodities in trading today. The company is betting that more traders will be drawn to its platform with these reduced costs as gold continues to rise in price and oil remains a key asset despite macroeconomic fluctuations.

Gold and Oil

The company reduced the spreads for gold from 20 cents to 16 cents on its Standard accounts and from 20 cents to 11 cents on its Pro accounts. Oil spreads also saw a significant decrease, down to just 2 cents on Standard accounts. Desyatov discussed these changes, revealing how they reflect the company's strategy to adapt to market demands.

“The gold market is highly developed, and brokers have been competing to offer the best conditions for trading gold in recent years. Over the past five years, the share of gold trading has grown significantly across the industry. For many market participants, gold has become the number one trading instrument,” he said.

“Oil is also quite popular, though its demand fluctuates depending on the macroeconomic environment,” he continued. “Our strategy is to provide the best conditions for top trading instruments, and oil is a prime example.”

Over the past five years, the interest in gold trading has surged. Desyatov attributes this to its status as a safe-haven asset, especially in times of economic uncertainty. On the other hand, Oil, while influenced by macroeconomic conditions, continues to attract consistent trading interest.

Additionally, market volatility has played a crucial role in Exness’s decision to adjust spreads. Desyatov explained that changing interest rates and economic conditions, particularly in the aftermath of the pandemic, have led to a shift in global asset allocation.

“Macroeconomic factors have a substantial impact, particularly with the changing interest rates during and after the pandemic,” Desyatov explained. “These shifts have influenced global asset allocation in trading. Gold is often seen as a hedge against inflation, and volatility in the equities market is closely tied to interest rates. As a result, we do observe a correlation.”

Gold, often seen as a hedge against inflation, has gained even more traction in the current environment. The correlation between equities market volatility and the popularity of gold is evident as traders seek stability in unpredictable times.

The reduction in spreads is not just a cost-saving measure for traders but could lead to increased trading volumes. As transaction costs go down, Desyatov predicts that traders will be more inclined to engage in more frequent trades, ultimately boosting activity on the platform.

“We know that when transaction costs decrease, trading volumes tend to increase, and this is exactly what we have observed,” he said. “Reducing transaction costs is a broader trend, and we believe that the industry should continue to focus on this as technology allows for greater efficiency.”

Long-Term Effect

While cutting spreads may seem like a revenue sacrifice for brokers in the short term, the long-term benefits are clear. Desyatov emphasized that not adapting to lower transaction costs could be detrimental to any brokerage firm.

“Periods of high volatility present both challenges and opportunities. The challenges are primarily technological, such as ensuring stable performance even when liquidity is low. It is particularly difficult to maintain very stable and low spreads during these times,” he noted.

Desyatov also commented on the aspect of long-term revenue generation in light of the increasingly competitive prices, particularly in the gold market. “Revenue generation depends on the broker’s strategy, but given the industry trend, not reducing transaction costs could be detrimental in the long run.”

Traders are seeking out the most favorable conditions, and Exness’ efforts to reduce transaction costs aims to position it as a strong contender in this race.

“We know that when transaction costs decrease, trading volumes tend to increase, and this is exactly what we have observed. Reducing transaction costs is a broader trend, and we believe that the industry should continue to focus on this as technology allows for greater efficiency.”

Finance Magnates recently reported that Gold prices have skyrocketed to unprecedented levels, reaching a new all-time high of $2,685. Despite a slight decline, these prices remain near record levels.

According to the report, this jump is due to a combination of favorable economic factors, including China's stimulus measures, Middle East geopolitical tensions, and recent monetary policy decisions by major central banks.