XAU/USD is quoted in dollars per troy ounce: what does that mean for your position size?
Gold is quoted in US dollars per troy ounce, not in pips. A troy ounce is a unit of weight for precious metals, and it is heavier than the ounce used for food, so a one-dollar move in XAU/USD is a one-dollar move per troy ounce. The contract size, and how much money one dollar of movement is worth, are set by your broker, not by the quote. The gold guide covers what drives the price, and the how to trade gold guide covers sizing. Check the contract size with your broker before you size a position, because a position sized in pips for a currency pair will be far too large or too small in gold.
Questions for members:
- How do you turn a stop placed in dollars per ounce into the money you are prepared to lose?
- Do you size gold on a fixed dollar stop or on a percentage of the account? Why?
- When you compared your broker's XAU/USD price with the spot price, how wide was the gap, and at what time of day?
Background: How to trade gold (XAU/USD): drivers, strategies and risk
Gold moves in dollars per ounce, not pips, and its daily range dwarfs most currency pairs. Here is what actually drives the metal, how position sizing differs from forex, and how to trade it without getting shaken out.
What is XAU/USD?
XAU/USD is the price of one troy ounce of gold in US dollars. XAU is the market's code for gold, and the pair is how most retail traders access the metal.
Why does gold rise when interest rates fall?
Gold pays no interest, so it competes with bonds. When real yields fall, bonds pay less after inflation, and gold becomes relatively more attractive, which lifts its price.
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