Gold has been a store of value for thousands of years, and today it is one of the most actively traded instruments in the world. Traders usually access it as XAU/USD, the price of one troy ounce of gold in US dollars. Here are the main forces that drive it.
1. Real interest rates
Gold pays no interest. When real interest rates (interest rates minus inflation) rise, holding gold costs more in missed income, which tends to weigh on its price. When real rates fall, gold often becomes more attractive. That is why traders watch central bank meetings and inflation data closely.
2. The US dollar
Because gold is priced in dollars, a stronger dollar makes it more expensive for buyers using other currencies, and the price often falls. A weaker dollar tends to support gold. The relationship is not perfect, but it is one of the most watched in the market.
3. Safe-haven demand
During geopolitical tension, financial stress or sharp falls in stock markets, investors often move money into gold. These moves can be fast and large, which creates opportunity, and risk.
4. Central bank and investor demand
- Central banks buy gold to diversify their reserves, which can support prices over the long term.
- Flows into and out of gold-backed ETFs show how investors feel about the metal.
- Jewellery and industrial demand, particularly from China and India, plays a smaller but steady role.
Trading gold with BLAC FX
You can trade gold as a CFD alongside silver, platinum, palladium, crude oil and natural gas on MetaTrader 5, going long or short from 0.01 lots. As always, size positions carefully. Gold is volatile, and leverage magnifies both gains and losses.
This article is for general education only and is not investment advice. Trading forex and CFDs carries a high risk of losing money.