Invest in Gold (Gold/USD) market on XM MT4 and MT5

Trade Gold vs US dollars on XM

XAUUSD represents the price of gold in one troy ounce in US dollars. In other words, it shows how many dollars you need to buy one troy ounce of gold. For many years, gold has been an attractive commodity due to its storage value, beautiful appearance, and malleability.

Many investors consider gold as a safe haven for hedging against inflation. This is because gold tends to maintain its value during recessions and global cataclysms.

Trading gold in the forex market is also a great way for investors to diversify their portfolio and protect it from investment risk. If you are considering trading gold against the US dollar, it is helpful to have a good understanding of some of the factors that affect XAUUSD.

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What drives the price of gold?

Gold is one of the most popular assets in the world because of its intrinsic value and use. This precious metal is used in the manufacture of jewelry, certain medical and electronic devices, as well as large amounts of gold for investment purposes. The price of gold is influenced by a variety of factors, including the value of the US dollar, inflation, supply and demand, market speculation, and investor sentiment.

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Factors Affecting Gold Prices

Central Bank

Central banks around the world hold fiat money and gold as reserves. Most of them hold national reserves mainly in gold. If the central bank converts the accumulated fiat money into gold and saves it as a reserve, the price of gold will rise.

Value of USD

The value of gold can be inversely proportional to the value of the US dollar. Changes in the price of the US dollar also affect the price of gold. A strong US dollar usually means that the price of gold is kept low. The weak US dollar, on the other hand, can push gold prices to higher levels due to increased demand. As the value of the US dollar declines, gold may become cheaper in other currencies and demand may increase. Conversely, as the value of the US dollar rises, the price of gold in other currencies may rise and demand may fall. Thus, the prices of gold and the US dollar may appear to be moving in opposite directions due to investor sentiment, but the relationship between the two has not been determined.

Inflation

Gold is generally considered a hedge against “inflation”, where the prices of goods and services rise. Inflation raises commodity prices and lowers the value of the dollar. Unlike fiat money, precious metals tend to maintain their value and can even rise as inflation progresses.

Gold mining

Gold mining is done in South Africa, China, Russia, the United States, Peru, Australia and more. Most of the gold near the surface has already been mined, so it has risen for 10 years, but has not increased since 2016. Miners are now required to dig deeper in order to reach high-quality gold. The more difficult access to precious metals poses additional problems, including greater danger to miners and greater environmental impact. As a result, the cost of mining a smaller amount of gold is higher than before. This can increase the price of gold.

World treasure and industrial demand

In the United States, China, India, etc., a large amount of gold is consumed as jewelry, and gold is also used for industrial and technical purposes such as medical equipment and precision electronic equipment. As demand for electronics and jewelery increases, so does the price of gold.

Safe shelter

Investors tend to focus on gold because the value of gold generally does not decline during times of economic recession or geopolitical crisis, when the economic outlook is uncertain. Investors consider gold a “safe haven” during times of economic instability. Also, when returns on stocks, bonds, real estate, etc. decline, the willingness to invest in gold tends to increase and the price of gold tends to rise. Gold is the preferred asset as a hedging tool to protect investments from inflation and currency depreciation.

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Organizations that may affect XAUUSD price

Announcements, reports and actions by the following organizations may affect the price of XAUUSD.

WGC (World Gold Council)

A market development organization for the gold industry that aims to maintain and expand demand for precious metals.

LBMA (London Bullion Market Association)

An international industry group that represents the gold bullion market for over-the-counter transactions around the world.

COMEX (Commodity Exchange Inc)

Futures and options market for trading metals.

Zurich Gold Pool

A gold trading organization established by an agreement between UBS, the Swiss Bank and Credit Suisse.

CGSE (Chinese Gold & Silver Exchange Society)

An organization of Hong Kong gold trading companies participating in the China Gold and Silver Exchange.

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