Gold trading 101
Learning objectives
Read a gold quote and calculate what a given move costs at a given position size
Size a gold position from your risk percentage and stop distance
Describe gold's trading hours, spread behaviour and typical daily range
What is XAU/USD?
Gold appears as XAU/USD, priced in US dollars per troy ounce. A troy ounce is about 31.1 grams, slightly heavier than the ounce used for groceries, and it's the standard unit for precious metals worldwide.
The quote works exactly like a currency pair from How currency pairs work. Gold is the base, the dollar is the quote, so the price is what one ounce costs in dollars. Buying XAU/USD means long gold, short dollars, which is why a strengthening dollar weighs on the price even when nothing about gold has changed.
Some platforms also offer gold against other currencies, XAU/EUR or XAU/GBP, which removes the dollar leg. Liquidity is thinner and spreads wider, so the dollar-quoted version is the default for good reason.
Contract size explained
EUR/USD, and there's no cleverness in it.
It has the tightest spread available anywhere in retail trading. It's the most liquid instrument in any market, so slippage is minimal and stops behave. It moves around half a percent on an ordinary day, which is enough to trade and small enough that a sizing error teaches you something rather than ending the account. It's active across both the London and New York sessions. And every economic release affecting it is scheduled, published and analysed.
There's no faster way to learn how a market behaves than to watch one that behaves well.
Position size
Ounces
Value of $1 move
Value of $0.10 move
1.00 lot
100
$100
$10
0.10 lot
10
$10
$1
0.01 lot
1
$1
$0.10
Now compare with forex. A standard lot of EUR/USD moves about $10 per pip, and a pip is one ten-thousandth of the price. A standard lot of gold moves $100 per dollar, and gold routinely covers tens of dollars in a session.
The two instruments look identical on an order ticket and are not remotely comparable. A trader who habitually opens 0.10 lots on EUR/USD and opens 0.10 lots on gold has multiplied their exposure to ordinary daily movement several times over without noticing.
Note also that the numbers in the table are fixed in dollars, unlike forex pip values, because the quote currency is the dollar. That makes the arithmetic easier than it is on most pairs.
Sizing a gold trade
Same calculation as always, from Risk per trade: the 1% rule and position sizing, with gold's contract size plugged in.
Anna has $2,000 and risks 1%, so $20 at risk.
Her setup gives an entry with invalidation $8 below, so her stop distance is $8.
Risk per lot = $8 × 100 ounces = $800
$20 ÷ $800 = 0.025 lots
Rounded to what most platforms allow, that's 0.02 lots, which risks $16 on an $8 stop. Slightly under her limit, which is the correct direction to round.
Try it with a wider stop. If her invalidation sits $20 away:
$20 ÷ ($20 × 100) = 0.01 lots
The platform minimum, risking her full $20.
And a $30 stop would ask for less than the minimum tradeable size, which is the small account constraint Risk per trade: the 1% rule and position sizing named. On gold it appears sooner than on forex, because the contract is larger.
Practical consequence: on a small account, gold works with tighter stops and shorter timeframes, or it doesn't work. Deciding that in advance is better than discovering it by sizing wrongly.
Trading hours
Gold trades close to continuously across the trading week, following the same rough pattern as forex: a Sunday evening open, a Friday evening close, and a short daily break around the rollover period.
That makes it more flexible than oil or index products, which follow exchange hours. It also means the same weekend gap risk applies, and the same thin-liquidity window around the New York close that Forex sessions and liquidity described.
Liquidity concentrates in the London and New York hours. London has been the centre of physical gold trading for centuries and remains the reference point for the daily benchmark price. New York carries the futures volume. The overlap between them is where gold is deepest and spreads are tightest, and it's also when US economic data lands, which as What drives precious metals explains is when gold does most of its moving.
Spreads and costs
Gold's spread is wider than a forex major's in absolute terms and needs to be read against its larger moves rather than compared directly.
Three things worth checking on your own account:
The spread in dollars and cents, not in vague "points", since platforms differ in how they display it.
How it behaves around news and at the rollover. It widens like everything else, and on an instrument that moves in dollars rather than fractions of a cent, that widening costs more.
Overnight financing. Gold CFDs carry the same swap charges as any leveraged position, and they can differ substantially between long and short. If you hold for days, check both directions before you assume.
What normal looks like
Gold typically moves somewhere around one to one and a half percent in a day, which is roughly two to three times a forex major and considerably less than crypto or oil.
That's a useful middle position: enough movement to make a trade worthwhile, orderly enough that a well-placed stop generally survives ordinary noise. It's why The instrument map: forex, stocks, indices, commodities, metals, crypto CFDs put gold third on the ladder, after majors and indices and before single stocks and oil.
The qualifier is that a percentage move on gold is a large dollar number on a 100-ounce contract, which is the point this lesson keeps returning to for good reason.
Key takeaways
Gold is quoted as XAU/USD in dollars per troy ounce, and buying it means being long gold and short dollars, so dollar strength alone can move your position
A standard lot is 100 ounces, so a $1 move is $100. Gold and forex look identical on an order ticket and are not comparable
Run the sizing calculation with the 100-ounce contract in it. On a small account gold needs tighter stops or it exceeds the minimum position size
Gold trades near-continuously but concentrates its liquidity and its movement in the London and New York hours