XAU/USD is the price of one troy ounce of gold in US dollars. It is the most-traded metal instrument on IDTraders and on most platforms, and it is misunderstood in a specific way: people read a rise in XAU/USD as "gold went up" when, quite often, what happened is that the dollar went down.
Two things in one price
Like any pair, XAU/USD is a comparison. If gold's value is unchanged but the dollar weakens against everything, it takes more dollars to buy an ounce and XAU/USD rises. If the dollar strengthens, XAU/USD falls, even on a day when gold priced in euros or yen is flat.
A useful check is to look at gold in another currency. If XAU/USD rose 1% and XAU/EUR rose 1% too, gold itself went up. If XAU/USD rose 1% and XAU/EUR did nothing, the move was the dollar. Over a typical month roughly half of gold's dollar moves are explained by the dollar index.
Why the dollar, and not something else
Gold is quoted in dollars because the dollar is the world's reserve currency and the unit in which most international trade and finance is settled. The London gold fix, the futures contract in New York and the central-bank reserves of most countries are all dollar-denominated. It is convention with a hundred years of momentum behind it, and it means every gold trader is also, whether they want to be or not, a dollar trader.
The three drivers, in order
If you had to explain gold's price with three inputs, they would be:
- Real interest rates. Gold pays nothing. When safe government bonds pay a high return above inflation, holding gold has a cost; when real rates are low or negative, gold's lack of yield stops mattering. This is the single strongest relationship in the market and gets its own article.
- The dollar. As above: a weaker dollar lifts the dollar price of gold, a stronger dollar lowers it.
- Fear. In crises, gold is bought as a store of value that no government can print. Wars, bank failures and sharp equity sell-offs tend to lift it, at least briefly.
Notice that the first two drivers are both about US monetary policy. Higher Fed rates raise real yields (bad for gold) and strengthen the dollar (also bad for gold). That is why gold is so sensitive to US inflation data and Fed meetings — it is being hit from two directions by the same news.
Volatility: what a normal day looks like
Gold moves more than the major currency pairs and less than Bitcoin. A daily range of 1% is ordinary; 2% is a busy day, usually around US data; 3% or more is rare and means something happened. In dollar terms at a price near $4,000 that is $40, $80 and $120 an ounce. On the platform one lot is 100 ounces, so a 1% day on a 0.10-lot copy is a $400 swing. Gold masters who size sensibly account for this; their positions are smaller in lots than a forex master's would be.
What a gold master is actually trading
When you look at a gold master's profile, keep the two-things-in-one-price idea in mind. Some gold traders are really dollar traders using gold as the vehicle; their good months line up with dollar weakness. Others trade gold's own drivers — real yields, central-bank buying, crisis flows — and can profit in months when the dollar is flat. The second kind is rarer and often shows a lower correlation between their returns and the dollar index.
You do not need to know which kind you are copying. But if you also follow a forex master who is short the dollar, and a gold master who is long gold, you are more exposed to the dollar than you think, and a strong US inflation print will hit both copies at once.
Gold in other currencies
Because the dollar is only half the price, gold's story can look completely different in another currency. In 2022 gold in dollars was roughly flat for the year while gold in yen rose about 15%, because the yen fell so far against the dollar. A Japanese investor had a strong gold year; an American had a dull one; the metal did the same thing for both. Traders who watch XAU/EUR, XAU/GBP and XAU/JPY alongside XAU/USD get an early warning when a move is really a currency move: if gold is rising in every currency at once, something is happening to gold; if it is rising only in dollars, something is happening to the dollar. On the platform you trade the dollar version, but the cross-check is free and takes ten seconds on any charting site.
Reading the price on the platform
XAU/USD on the Live prices page is the spot price; a move from 4,000.00 to 4,004.00 is $4 an ounce, or 0.1%. Quotes carry two decimals. Because gold trades almost around the clock during the week — the Asian session is active in gold in a way it is not in EUR/USD — the price moves through the night, and a gold copy's equity in the morning can be noticeably different from the night before without anything dramatic having occurred.
XAU/USD is gold divided by the dollar. Before you decide gold "moved", check what the dollar did — half the time, that is the whole story.
This article is education, not investment advice. Trading and copy trading in leveraged instruments carry a high risk of losing the funds you allocate. Read the Risk Disclosure.