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02.06.2022 01:49 PM
XAU/USD: Features and recommendations

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The XAU/USD pair reflects the value of a troy ounce of gold in US dollars. For some brokers, the gold quote designation is expressed as GOLD (instead of XAU/USD). One troy ounce is equal to 31.1034768 grams (often rounded up to 31.1035 grams).

XAU/USD refers to pairs with a reverse currency quote. The commodity in the XAU/USD pair is a troy ounce of gold, and the US dollar is the second currency in the pair, which buys the base currency, gold (commonly referred to as XAU). 1 lot in the XAU/USD pair is equal to 100 ounces of gold.

At the moment, the XAU/USD pair is trading on the Forex market at a price close to 1855.00. This means that for one troy ounce of gold they give 1855 dollars.

Features of trading the XAU/USD pair

1. The main exchanges where gold is traded (during exchange hours) are the COMEX (commodity exchange) division of the New York Stock Exchange (NYSE) and the London Metal Exchange (LME). In the trading terminals of Forex brokers, the XAU/USD (GOLD) pair is traded around the clock. While commodity options and futures contracts for gold are traded on COMEX and LME, the spot price (the price of an instant purchase and sale transaction) for gold is presented in the trading terminals of Forex brokers, which is reflected in quotes in the XAU/USD pair.

2. The XAU/USD pair is popular with traders. This is one of the most liquid currency pairs. This means that at almost any moment there will be both buyers and sellers for the XAU/USD pair. Trading the XAU/USD pair is no different from trading another currency pair and is also amenable to technical and fundamental analysis.

3. The XAU/USD pair is actively traded throughout the trading day. The highest peak of trading activity with the XAU/USD pair and the largest trading volumes occur in the first half of the trading sessions in Asia, Europe, and the USA. The Asian trading session takes place from 00:00 to 08:00 (GMT), European from 06:00 to 16:00 (GMT), and American from 12:00 to 22:00 (GMT).

4. Moreover, the time between the beginning of the session in New York (12:00) and the end of the trading session in London (16:00) will be the most active, since the two trading sessions overlap at this time, and European and US traders participate in trading.

5. Gold, along with the yen and other precious metals, has the status of a safe-haven asset and is in active demand among investors during periods of economic or political instability in the world or in certain regions of the world.

6. A surge in trading volatility in the XAU/USD pair occurs during the publication of important macroeconomic indicators for the US, the eurozone, Japan, and the UK. The following macroeconomic factors and indicators give the greatest volatility to the XAU/USD pair:

  • Decisions of the central banks of the USA, the eurozone, Japan, and the UK regarding monetary policy in these regions and countries;
  • Speeches of the heads of the central banks of the USA, Eurozone, Japan, and Great Britain;
  • Publication of minutes from the latest meetings of the central banks of the USA, the eurozone, Japan, and the UK on monetary policy issues;
  • Data from the US labor market;
  • Data on GDP of the USA, Eurozone, Japan, and Great Britain;
  • Publication of inflationary indicators of the USA, Eurozone, Japan, and Great Britain.
Strong macroeconomic indicators in the US lead to the strengthening of the dollar, including in the XAU/USD pair, and vice versa.

7. Important political events in the US and in the world also affect the quotes of currencies, primarily the dollar and the XAU/USD pair.

8. An increase in buying activity on world stock markets leads, as a rule, to the withdrawal of investors' funds from safe-haven assets, which, among other things, is gold. The growth of stock indices is therefore accompanied by a fall in gold quotes and the XAU/USD pair.9. In relation to other currency pairs, the XAU/USD pair has a fairly strong correlation with the EUR/USD (84%), AUD/USD (88%), NZD/USD (80%), XAG/USD (82%) pairs. Significant inverse correlation of the XAU/USD pair with the USD/CHF (87%), USD/JPY (80%) pairs.10. Intraday volatility of the XAU/USD pair fluctuates during different periods of the year. On average, it is 3000 – 6000 points (30–60 dollars per ounce), but can exceed 1000 points (100 dollars per ounce) during periods of important news of a political or economic nature.
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