Gold is a currency
In the Forex market, gold is a form of currency. They can be traded in the same way as other currencies. However there is a difference: gold can only be traded against United States dollars (USD).
The internationally accepted code for gold is XAU. The code is built from X in Forex and the chemical sign for gold (AU).
Gold trading price
The price of gold is measured by its weight. The price shows how much it costs for one ounce of gold in US dollars. There are several methods of weight measurement in the special metals and stones markets. The most common is troy - a troy ounce equals about 31.10 grams; an avoirdupois ounce equals about 28.35 grams.
For example, if the gold price is 612.97, it means that an ounce of gold is traded for 612.97USD.
Trading with gold rates
Gold investment is done in the same way as with foreign currencies. Trading is performed directly between the seller and the buyer (via the internet trading platform), and no other people or organizations are involved.
Like foreign currency rates, trading with gold rates does not require the "physical" purchase or sale of the real material. Using the example above, if you buy Forex gold for the price of 612.97USD, you do not have an ounce of gold that you can hold, but you rather have the obligation to buy XAU at $612.97. When you close your Forex deal, you sell the XAU (gold) and close your obligation. If you sell it for the price of $615.00, you have made profit of $3.03 for every ounce (unit) of gold in your contract.
Rising gold prices affect currency
Rising gold prices can affect other currencies. Higher gold prices can be especially important to the currencies of major gold-producing countries. Australia is the world's third largest exporter of gold, and Canada is the world's third largest producer of gold. So, if you believe the price of gold will continue to rise, you can establish trades in the Australian dollar or the Canadian dollar because those currencies will likely become stronger.
In the Forex market, gold is neutral – that means that gold is not related to any one country, so the rising price influences trades in several currencies. Gold prices can rise when the political or economic situation in United States is changing. If the gold price starts to increase, you might expect it to go higher in the next periods of trading. With this expectation, traders might decide to sell US dollars and buy euros because they believe US dollars will fall in value and euros will increase.