What is XAU in Forex
While reading or trading on Forex you have encounter someone saying XAU. While it consists of three letters it is common to use that letter combination.
AU is short from chemical element Gold that is under symbol AU and gold is a form of currency.
If you have read about currency pair in Forex you have seen that Australian dollar is starting with AU letters. So, in order there is no confusion, letter X is added in front Gold AU.
That way we have XAU which represents Gold in Forex.
What is XAUUSD Meaning
XAUUSD means XAU USD trading pair that is well known in Forex. It also means we have two currencies that are compared to each other.
When you write XAUUSD = 1722.90, it means that one Gold Ounce is worth 1722.90 USD. When you want to buy one Gold Ounce you will need to give 1722.90 U.S. dollars.
XAUUSD in Forex means currency pair value and when one currency is rising in value other currency is falling in value.
Trader job is to define where the price of a trading pair will move. Will it rise or will it fall down.
When the price of XAUUSD is falling down it means XAU is losing its value against U.S. dollar.
When the price of XAU is rising it means XAU is gaining in value against U.S. dollar.
XAU in Forex Chart Example
As an example of XAU in Forex here is the chart where the value of XAU is compared to U.S. dollar.
You can see that the current price is 1702.91 which means we need $1702.91 to buy one ounce(oz) of gold.
The value is rising and falling through time and the job of a trader is to determine where the price will go.
How is XAU Traded
XAU or Gold is traded as a currency. While Gold is not currency maybe it is little hard to understand this.
You will find Gold or XAU traded only against U.S. dollar. You will not see any other currency traded against XAU because it is hard to measure vaule against many currencies.
To simplify and not to make a problem by measuring value against many currencies there is one standard and that is U.S. dollar.
Why the U.S.dollar?
While U.S. dollar is main reserve currency in the world this is logical reason. Since the start combination XAUUSD is used and it will stay until something changes.
Price of XAU will move against U.S.dollar. This means if the value of U.S. dollar is rising then the value of Gold will fall.
When the value of U.S. dollar is falling then the value of Gold will rise.
The value of Gold is expressed as one ounce written as 1 oz. In trading, standard lot size is 100 oz of gold compared to 100,000 units of U.S. dollars in case of standard currency.
XAUUSD in Forex is combination of two currencies. It is standard pairing of two currencies that are traded one against other.
Each currency in XAUUSD represent currency of certain country or chemical element. XAU represents Gold and USD represents U.S. dollar.
If you want to learn more about other combinations of currency pairs like GBPUSD check the article what is GU in Forex.