Trading gold (XAU/USD): what moves it and how to size it

Gold is one of the most traded instruments among retail forex traders, and one we spend a lot of time on, both in our signals and in the trading systems we build. It trades like a currency pair on your platform, but it behaves differently, and the differences catch people out.

What XAU/USD is

XAU/USD is the price of one troy ounce of gold in US dollars. Buying it means buying gold and paying in dollars. On most platforms, one lot is 100 ounces, so each $1 move in the price is worth $100 on one lot, $10 on 0.10 lots and $1 on 0.01 lots. Some brokers use different contract sizes, so check the specification in your platform.

"Pips" on gold are confusing because brokers define them differently, as $0.01 or $0.10. It's simpler to think in dollars of price movement.

Why gold moves more

Gold's daily range in dollar terms is large, and it can move several hundred pips' worth while EUR/USD moves fifty. If you use the lot sizes you use on EUR/USD, you're taking much more risk on gold than you think. Always size gold trades from the stop distance in dollars, with the position size calculator.

Example: with a $5,000 account risking 1% ($50) and a stop $8 away, you can trade 0.06 lots ($6 per $1 move × $8 = $48).

What drives the gold price

• US interest rates and real yields. Gold pays no interest, so it tends to struggle when real yields (interest rates minus inflation) rise and do well when they fall.
• The US dollar. Gold is priced in dollars, so a stronger dollar often weighs on it, though not always.
• Risk and fear. Gold is a traditional safe haven. Geopolitical shocks and market stress can send it higher quickly.
• Central bank buying. Central banks have been large buyers of gold in recent years, which supports the price over the long term.
• US economic data. Inflation (CPI), jobs (non-farm payrolls) and Federal Reserve decisions often cause the biggest moves of the month.

The best hours to trade gold

Gold is most active during the London session and especially the London–New York overlap, roughly 12:00 to 16:00 GMT, when US data comes out. The Asian session is usually quieter, with smaller ranges. Spreads widen sharply around the daily rollover, about 22:00 GMT, and at the Monday open. Our guide to forex sessions shows how the day is structured.

Gold-specific risks

• News spikes. Gold can move $10 to $30 in seconds on US data. Stops can fill well beyond their level. Read trading around news releases before you hold a gold trade through CPI or payrolls.
• Weekend gaps. Gold can open on Monday far from Friday's close if something happens over the weekend.
• Grid and martingale EAs. Gold is popular with Expert Advisors that add to losing positions. Gold's strong trends are exactly what breaks them. See how to judge an Expert Advisor.

A simple routine

1. Mark yesterday's high, low and the daily pivot points.
2. Check the economic calendar for US releases and Fed speakers.
3. Decide your risk in dollars and the stop distance, then calculate the lot size.
4. Trade the London and New York hours. Avoid holding through big releases unless that's part of your plan.

Risk note: trading forex carries a high level of risk and may not be suitable for everyone. This article is for education only and is not financial advice.