Trading conceptsUpdated 2 min readBy the FXNOD team
XAUUSD: how gold trading works
XAUUSD is the price of one troy ounce of gold in US dollars. XAU is gold's market code. Retail traders usually trade it as a CFD, without owning metal. Gold tends to rise when US interest rates or the dollar fall and when investors are fearful. It moves further than most currency pairs, so positions need to be smaller.
What moves gold
| Driver | Usual effect on gold |
|---|---|
| US interest rates rising | Down: gold pays no interest, so other assets become more attractive |
| US dollar strengthening | Down: gold is priced in dollars |
| Inflation fears | Up: gold is held as a store of value |
| Crisis and uncertainty | Up: demand for safe assets |
| Central bank buying | Up |
These are tendencies. Gold and the dollar sometimes rise together in a crisis, and gold can fall in a panic when investors sell everything to raise cash.
When it trades
Gold trades almost around the clock from Monday to Friday, with a short daily break. It is most active during the London and New York sessions, and moves sharply on US data such as inflation and the jobs report. Exact hours depend on your broker.
Volatility and position size
Gold routinely moves 1% or more in a day, far more in money terms than a major currency pair at the same lot size. A stop that would be wide on a currency pair is noise on gold. Measure the stop from the chart or from ATR, work out what one point is worth for your size from the contract specification, and size the position so that the stop costs your fixed risk. For most small accounts that means the smallest size available.
Ways to trade gold
| Way | What it is |
|---|---|
| CFD | A leveraged contract on the price; no ownership |
| Futures | Exchange-traded contracts with an expiry |
| Funds | Shares in a fund that holds gold |
| Physical | Coins or bars |
Mistakes on gold
- Using the same lot size as on a currency pair.
- Stops inside the normal daily range.
- Trading through US data releases without knowing they are due.
- Treating it as a safe asset in a short-term leveraged trade. Safe for a long-term holder is not safe for a day trader.
On Deriv and in FXNOD
Deriv lists gold among its markets. Which products are offered on it depends on your account. FXNOD's market picker shows the markets your Deriv account offers for the trade type you choose.
Questions people ask
- What does XAUUSD mean?
- The price of one troy ounce of gold in US dollars. XAU is gold's code and USD is the dollar's.
- Is gold good for beginners?
- It is very volatile, which makes position sizing unforgiving. Learn sizing on a demo account first.
- What is the best time to trade gold?
- The London and New York sessions are the most active. US data releases bring the largest and riskiest moves.
Try it without risking money
Connect your Deriv demo account to FXNOD and place the trade you just read about with virtual funds. Check the available tool packages in Discover.
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