Basics

Explanations on How Gold Affects Forex


A very special forex symbol that includes gold is the XAU/USD pair. This currency pair tracks the value of one troy ounce of gold relative to the US dollar. It is a fact that gold is one of the oldest ways of storing value throughout history. However, do you know how gold affects forex prices?

Gold-related forex pairs have two interesting market behaviors. This article will explore these two points for traders, as well as discuss how gold affects forex market prices.

The first interesting point is that gold reflects the state of political and economic stability. In other words, during times of geo-political or economic uncertainty, investors seek safe-haven assets such as gold. On the other hand, when there is economic prosperity and political stability, the low returns from gold prices may lead investors to seek higher returns (and higher-risk assets) in other markets. The forex pairs related to gold can be an attractive option for investors seeking to diversify and find a wider variety of returns.

Whether related to political or economic uncertainty, when there is demand to acquire gold, the gold-related forex pairs such as XAU/USD can become more volatile as investors engage in more speculative trading. On the other hand, when the price of gold decreases, either due to low demand or due to high supply, investors may seek to sell gold related forex pairs, in anticipation of a price decrease.

Using Advanced Charting, from FxTrade Practice (FXCM.com) we can see more than ten years of trades.

It is possible to observe those two periods, first, between 2008 and 2012, with a good increase in the value of the gold-related forex pairs and relatively low volume of transactions.

It was the period of uncertainty coming after the Lehman Brothers bankruptcy and the great global financial crisis that followed. The second period from 2013 to 2018, with a significant increase in volume and a relative stability in the price of gold-related forex pairs.

What marks this second period is relative global economic stability

We can see that something has apparently changed in 2019. Probably the trade war US and China that brought some uncertainty over the global economy in near future. However, events like these can also create opportunities if you have the proper tools to identify market signals.

In the forex market, information and education are like gold. Wiseinvest has a large inventory of internal and written knowledge to share with you.

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Each AI signal alert consists of the following five data points:

  • Symbol (forex pair)
  • Direction (long or short)
  • Position size (number of units or lots)
  • Take profit (price level to exit with maximum gain)
  • Stop loss (price level to exit with maximum loss)

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Takeaways

  • Investing in the gold market is an ancient human practice, and gold-related forex pairs incorporate that tradition which are adapted to modern financial markets.
  • There is a tendency to run to gold-related assets in periods were uncertainty increases
  • Popular gold-related forex pairs include the XAU/USD pair.
  • The Artificial Intelligence (A.I.) responsible for emitting the Wise-Signals is totally free of emotional judgments, and aims to minimizes losses during turbulent market events.

Better trades have bigger margins to operate; our AI forex trading system can help you to identify the best opportunities.

Disclaimer: Forex and Contracts for Difference (CFDs) are complex instruments and come with a high risk of losing money due to leverage. Forex trading is not suitable for everyone. You should consider whether you understand how forex and CFDs work and whether you can afford to take the high risk of losing your money.

The forex brokerages displayed shall disclaim the overall performance of traders in their platforms. Oanda warns that 76.8% of retail forex traders lose money trading CFDs. XTB warns that 80% of retail forex traders lose money trading CFDs. The forex broker Fxcm warns that 69.66% of retail forex traders lose money trading CFDs.

The performances aforementioned are not related to Wiseinvest AI forex trading and AI forex signals system. You can check the performance of our AI forex system on our dashboard.