Periods of economic instability lead to excitement in gold trading on markets, especially Forex. The Xauusd currency pair represents the price of gold, which is indispensable in the trading product portfolio of the Forex world. Currently, many new investors cannot distinguish the difference between product trading markets. So what should you keep in mind when trading what is xauusd ? Let’s learn about these issues with Learn Forex Trading through the article below.
Get an overview of Xauusd trading
XAU stands for “Gold” in the international code for gold. XAUUSD represents the exchange rate between the price of gold and the US dollar (USD). Whether or not to invest in XAU is a question asked by many new investors. So to know whether to invest in this type of product or not, let’s learn more about what is xauusd first.
The concept of what is xauusd?
In the Forex market, gold is symbolized as XAU and is on the list of trading products of most brokers in the world. XAU/USD is the symbol for the exchange rate between gold and the US dollar. It is similar to EUR/USD which is the exchange rate between the Euro and the US dollar. To explain simply: in Latin, “AU” means gold, while “X” represents forex products in currency pairs.
XAU is the symbol for gold products in the foreign exchange market. While USD represents the US dollar. That means XAUUSD is the exchange rate between gold and US dollars. XAUUSD is one of the popular currency pairs in the Forex market. However, to invest in this financial product effectively, investors need to know how many US dollars it costs to buy one ounce of gold.
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How much does one lot of Xauusd cost?
When Xauusd trades, the unit Ounce (oz) is used to measure the volume of gold. Specific conversions are as follows:
- 1 lot XAUUSD = 100 ounces.
- 1 mini lot of XAUUSD (0.1 lot of gold) = 10 ounces.
- 1 micro lot of XAUUSD (0.01 lot of gold) = 1 ounce.
- The value of each XAUUSD pip when trading 1 standard lot is 1 USD.
- The value of each XAUUSD pip when trading 1 standard mini lot is 0.1 USD.
- The value of each XAUUSD pip when trading 1 standard micro lot is 0.01 USD.
Xauusd exchange rate in Forex
Exchange rate what is xauusd? In the Forex market, it represents the exchange rate between the price of gold (XAU) and the US dollar (USD). This rate represents the number of US dollars needed to buy one ounce of gold. Note that this rate changes over time. XAU/USD is quoted to 2 decimal places both in the spot market and the Forex market. The value of 1 pip for gold is 0.1 USD.
For example, if the XAU/USD rate is 1933.97, that means 1 Ounce of Gold is equivalent to 1933.97 USD. Suppose the gold rate increases to 1934.07, that means an increase of 1 pip, ie 1934.07 – 1933.97 = 0.1 USD. If you trade 1 lot of XAU/USD, which is equivalent to 100 Ounces of Gold, each pip movement will be worth 10 USD. This calculation is based on multiplying the number of Ounces (100) by the value of 1 pip (0.1 USD): 100 (Ounces) x 0.1 (USD) = 10 USD.
Advantages and disadvantages of investing in Xauusd
If you are wondering about investing in XAU in the Forex market. Let’s learn about the risks and potential of this currency pair. Below is some information about the product’s strengths and limitations to help you have an overview:
What are the advantages of investing in what is xauusd?
Compared to buying gold in the traditional form, investing in forex gold or CFD gold brings many more benefits, including:
- Convenient and flexible: Just register to open an account on Forex, you can trade foreign exchange gold online anytime, anywhere.
- High liquidity: Gold trading on Forex allows you to buy and sell at any time. You can take advantage of trading opportunities immediately without liquidity constraints.
- Safety and convenience: When investing in gold through Forex, you do not need to worry about storing and preserving physical gold. All transactions take place on an electronic platform, in virtual form, helping to ensure safety and convenience.
- Trade on modern platforms: Gold trading on Forex is supported by advanced trading platforms. It provides high technical analysis features and allows placing trading orders such as Market, Limit, or Stop.
- Leverage: The Forex market allows high leverage when trading gold.
- Support deposit and withdrawal in US: Support currency deposit and withdrawal channels in US, ensuring the transaction process takes place quickly.
- Ease of analysis: The XAU/USD currency pair is easier to analyze than many other currency pairs.
Disadvantages of investing in what is xauusd?
While investing in XAUUSD can yield significant profits, there are also limitations to keep in mind. Especially when traders lack knowledge, experience and acumen.
- Currently, Forex exchanges in US are not licensed and operate without legal management. Therefore, there are many cases of customer fraud.
- Another risk comes from not being able to control personal emotions. The Forex market is full of temptations and influences. Not being able to control emotions can affect an investor’s trading.
- High leverage also carries risks. However, the higher the leverage, the greater the risk and possibility of losing money.
Therefore, investing in gold or CFDs is not always advantageous. To avoid unwanted risks, accumulate knowledge and gain experience before investing.
What factors affect the price of what is xauusd?
There are many important factors affecting gold price fluctuations in the world. Therefore, to successfully trade gold in the forex market, traders need to clearly understand these influencing factors to analyze and predict the future trend of the XAU/USD exchange rate.
Price in US dollars
When the US dollar depreciates, gold prices often increase and vice versa. Gold becomes more attractive than ever when the US dollar becomes weak. This inverse relationship is based on the safe nature of Xauusd compared to other asset classes. The US Dollar is currently considered a safe currency. So it could create a big obstacle for gold’s price increase. When the demand for the US Dollar increases, it means the need to store gold decreases. In other words, as the value of the USD increases, the XAU/USD exchange rate will decrease.
Because the central bank reserves gold
Central banks’ policy on the ratio of gold reserves to banknotes is an important factor affecting gold prices. When central banks increase their gold reserve ratio, they will buy more gold. This leads to scarcity and increased prices of gold in the market.
On the contrary, when banks reduce their gold reserve ratio, the amount of gold supply in the market will increase, reducing gold prices. Currently, some countries with central banks often accumulate a lot of gold. Typically: United States, Germany, Italy, Greece, France, Portugal…
Economic indicators
Interest rates and inflation are two economic indicators that have a significant impact on gold price fluctuations. A policy of increasing interest rates can reduce gold prices. This is understandable because when interest rates increase, people tend to deposit money in banks. Or switch to other investment opportunities to earn higher profits. Therefore the price of gold decreased.
On the contrary, when interest rates decrease, gold becomes more attractive. Currencies can lose value over time due to the effects of inflation. Meanwhile, gold tends to stay stable over long periods of time. Therefore, when inflation increases, people tend to switch to owning gold rather than currency.
Supply and demand relationship
Not only the price of gold, but the price of all goods also depends on the relationship between supply and demand. When the demand for holding gold increases while the supply is not enough to meet it, the price of gold will increase and vice versa.
It cannot be denied that gold is a safe method and a “lifesaver”. And the need to hoard gold from ancient times to the present is constantly increasing. However, gold supply is often limited due to the complicated process. Therefore, one thing we can observe is that gold prices tend to increase in the long term.
The economic crisis causes the price of Xauusd to increase
Economic and political instability is one of the factors causing a sharp increase in gold prices. Gold is considered a valuable physical asset. Gold is stable and not affected by inflation. Besides, gold has a large market and high liquidity. These reasons make gold a safe asset. When there is economic or political instability in a country, people often lose faith in the government’s currency and often turn to gold.
Trading strategy what is xauusd?
Financial markets experience constant fluctuations. Therefore, to invest in the Forex market in general and the Xauusd currency pair in particular. Investors need to have their own strategies to bring the highest efficiency. For those who are just starting out and do not know how to build a what is xauusd investment strategy, you can refer to some investment strategies from experts below to accumulate more experience for yourself.
Long-term Xauusd trading strategy
This strategy applies to the spot gold market. Where physical gold trading takes place. With this strategy, investors can buy gold to store for several months or even several years. When the price of gold increases, they can sell and make a profit. The basis for applying this strategy is that gold prices usually tend to increase in the long term. By looking at the gold price chart, investors can easily recognize this. So how to read charts in forex? Is it difficult to view xauusd chart? You need to practice and learn a lot from previous traders about this.
The downward price fluctuations are only short-term market corrections. And it does not affect the general long-term trend. However, to trade Xauusd according to this strategy, investors need to have a large enough capital to earn significant profits. This is to compensate for the cost of holding gold for a long investment period. When trading Xauusd over time, losing swap fees is inevitable. What is swap fee ? is a fee that helps you hold an order overnight.
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Scalping Xauusd trading strategy
To invest in Xauusd according to the scalping strategy, investors need to have effective capital management and emotional management. This form of investment is only suitable when:
- Investors have accumulated a lot of experience trading gold. They have trading skills and a deep understanding of technical analysis.
- The Forex market is experiencing strong price fluctuations.
- Suitable for those who have a deep understanding of the market. It takes time to monitor and analyze the market.
However, trading Xauusd in a scalping style can bring many risks. If a trader cannot keep up with the market rhythm, it can lead to serious losses. Traders can use the Scalping trading method. This is to support transactions over short periods of time, from a few hours to a few days.
Epilogue
Above Learn Forex Trading has shared with you the concept of what is xauusd and issues related to Xauusd. Hopefully, the content in the article will help you better understand Xauusd for convenient and safe transactions. The important thing is that you need to accumulate experience and find your own secret, which is the key to success.
Frequently asked questions?
what is xauusd?
Xauusd is a currency pair that represents the exchange rate between gold and the US dollar.
Why do people call it Xauusd instead of gold and dollars?
Xauusd is the standard display according to foreign exchange market conventions, in which XAU is the symbol first and the US dollar USD is second.
How to read and understand the Xauusd chart?
Most current forex trading platforms provide technical analysis tools and indicators. Based on that, you can read and understand the Xauusd chart, know the trend, and forecast the price.
