Gold price and how to trade it in Forex


Due to its unique features, the gold price has always been high. It served as a desirable trophy, an exchange equivalent, a unit of money and concession compensation in political agreements.

The high exchange rate of the gold and its ability to withstand the test of time led to the idea to tie national currencies to the price of this yellow metal. Throughout the centuries, this encouraged the development of global trade.

This is how it was until the end of the last century when the world currencies got rid of the gold equivalent. After that, this precious metal became just a regular commodity.

The gold prices are always high, attracting large investors as a niche to invest in profitably when the political and economic situation is unstable.

Due to the widespread use of this metal in the medical field and production sector, the exchange rate of gold as a commodity depends on global factors.

Gold price and what it depends on


 1. What do the analysts base their predictions of the change in gold price on
 2. Ins and outs of trading gold in Forex
 3. XAU/USD trading strategies

What do the analysts base their predictions of the change in gold price on

When it comes to gold, you have to approach price forecasts with a great deal of thought and consider a variety of factors affecting the formation of the gold price.

A retrospective analysis of the gold exchange rate demonstrates that:

  • the increasing demand for precious metal and emergence of new technologies requiring its use, along with depletion of old deposits will inevitably lead to a lack of supply. This allows doing forecasts regarding the increase in the gold price. It is evident that the discovery of new gold fields and availability of less costly mining technologies make the price go down.
  • there is a presence of the inverse dependence of the value of precious metal on the state of the global economy. Simply pay attention to the increase in the gold exchange rate during economic turmoil in the United States or the EU countries, and forecast of XAU/USD movement amidst the crisis recovery becomes quite possible. The central banks which form foreign exchange reserves are another major factor impacting the market.
  • the analytics of the gold price extends beyond the assessment of natural and political factors. There is a direct correlation between gold and crude oil. Its price is a powerful tool used to restrain or encourage economic growth in countries, the budgets of which depend directly on the production volumes, sale and consumption of this natural resource. By analyzing the dynamics of crude oil prices, the forecast of gold prices can be further elaborated.
  • direct or inverse relationship between a number of dollar pairs and XAU/USD. Without digging deep into the economic causes of this phenomenon, we can predict what will happen to the gold exchange rate. If the AUD/USD pair goes up, XAU/USD will increase as well.

By considering the key factors contributing to the formation of gold price, it is possible to make forecasts for long-term price trends.

Ins and outs of trading gold in Forex

When investing in gold, each market player pursues personal interest. Traders use various strategies, factoring in the intricacies of the gold exchange rate formation in Forex.

London Gold Fixing or Gold Fix (setting of the price of gold) takes place twice each business day at 10:30 am and 3:00 pm local time. In between fixings, the price is determined by market demand.

Gold trading strategies factor in the specifics of gold. Some of them catch the eye of the stock speculators, while others pose certain difficulties.

When trading XAU/USD pair, make sure to take the following aspects into consideration:

1. High spreads, low leverage.
2. The relative stability of the exchange rate of gold in the Forex market. When the quotes plummet, there is a high likelihood of their return to the previous level.
3. High volatility.

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XAU/USD trading strategies

Long-term investment in XAU/USD is based on the current exchange rate of the gold in Forex and the outcome of the fundamental analysis determining the stable price trend.

Market entry is done during a period of limited demand for gold when its Forex price drops, or in anticipation of the upcoming economic crisis.

It should be emphasized that long-term investments in precious metals are driven not so much by the desire to increase the capital but rather to preserve it.

The gold prices are pretty stable in the long-term horizon. So, if you stick to the trading strategy, the chances of making solid profit are high.

Intraday and medium-term traders typically use two strategies described below:

1. Trading the news. With the release of reports about financial crises, terrorist attacks and global calamities, the gold price goes up, and Forex traders speculate on a rise. In contrast, when the news about the economic successes of the US or Europe are published, the XAU/USD plummets, with the bears profiting from it.

2. Use of XAU/USD correlation with other currency pairs. The trader analyses several instruments on the same timeframes, and then trades those where a clear direct or inverse relationship can be traced. It can be both AUD/USD and EUR/USD.

In most cases, investments in gold are justified and traders are naturally interested in it.

What to know:

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