Gold is a commodity subgroup and is one of the world's most traded precious metals. Other popular precious metals include silver, copper and platinum. Gold’s price is quoted per troy ounce (oz t), in US dollars. As such, it is often seen as a currency - XAU or XAU/USD.
The main drivers for the price of gold are the aggregate supply and demand for the numerator (XAU) versus the value of the denominator (USD).
Among the main factors determining gold prices are:
Geopolitical tensions and uncertainty - Political uncertainty, and/or instability is probably the single most influential factor determining the price of gold. Not knowing what will happen to political, social and economic realities has a psychological effect on day traders who hope to profit from changes in gold and other financial instruments.
Monetary policies of leading economies - particularly US Federal Reserve and People's Bank of China which are the central banks of the world’s two largest economies. Central banks affect global gold markets by purchasing and selling gold bullions in an effort to balance the country’s payments system, and to stabilise their currency’s exchange rate in relation to other foreign currencies (Forex).
Supply and demand - within the commodity markets on which precious metals are traded as futures and on spot markets. Supply and demand of gold correlates to their availability in nature (discoveries) and expected value as an exchangeable commodity.
Historically, shares and gold are considered opposites. When stock markets rise, the price of gold tends to fall, and vise versa. This has mainly to do with gold’s status as a 'safe haven' (i.e. a financially stable asset) when compared to stocks which are seen as more volatile. However, when trading gold and shares using leveraged CFDs, the differences between these assets are not so substantial.
Plus500’s leverage ratio for trading gold CFDs is 1:150, meaning with as little as $100 you can gain the effect of $15,000 capital. For a list of all our commodities, click here.
The leverage ratio available for shares CFDs is 1:20. For a list of all our shares, click here.
In addition, please note that as a CFD trader you do not actually own the underlying asset, but rather you are trading on the expected changes in its price, in the form of a Buy or Sell position.