As a token of your love, have you ever gifted a gold ring as a gift to a friend? Since the dawn of time, gold has been the most valuable metal. In times of political uncertainty, gold is still the ultimate currency. The gold market has been in a secular uptrend for the past ten years. Spot prices recently broke the historic barrier of $1,200 a troy ounce. The prices fell to $1,100 an ounce after that retracement. However, this uptrend is expected to continue for some time.
Many investors have turned to forex in the past decade after the catastrophic crash of the stock market. Small investors suffered losses of 60-70% in the stock market crash. Forex trading is now a lucrative way to make money. Forex trading is expected to make millions in the next decade.
It is not known that forex traders can also trade gold. You can trade gold and silver against the US Dollar (USD), on many forex brokers’ platforms. These precious metals are in high demand in the industrial sector. As the global economy recovers after the recession, prices for gold and silver will likely skyrocket as consumers start to buy again. You trade currency pairs by going long or short one currency. You simply buy one currency and then sell the other.
Spot gold trading on forex involves trading one troy ounce of gold against USD. This symbol is also called XAUUSD, with XAU being one ounce of pure gold. Let’s say the spot market price is 1100 XAUUSD. This means that one troy ounce of gold on the spot market is currently equal to $1,100 USD.
The bid/ask spread is used to determine the price of gold in the spot market. If the price quote reads 1110/1115 it means you can sell one troy-ounce of gold in spot market for $1110 and buy one troy ounce of gold at $1115. This spread will apply to spot gold trading on forex. Spot gold trading is fast-moving and the spread changes constantly throughout the day.
A standard lot for currency trading is $100,000. For forex gold, the standard lot equals 10 troy ounces. If you see the price quote as 1112/1117, and are interested in buying long, You will need to purchase 1 lot of gold, which is $11,170. The spot gold market is volatile and prices change constantly. Let’s say that you get the quote at 1120/1126 after just 60 minutes. The profit is $30. You decide to sell at $11,200, making a profit. To make $30 profit in 60 minutes, leverage would have required a lower initial investment.
Anti-dollar is also known for gold. This means that gold and USD have an inverted correlation. This inverse relationship can be used to hedge your positions in currency pairs.