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If you have ever fallen in love with a beautiful person, you then know the value of giving a gold ring or a gold necklace as a token of your true love. Gold has always been considered to highly valuable from the dawn of civilization.

It is still considered to be the ultimate currency and a safe haven in times of political and financial uncertainity. Recently gold price crossed the historical barrier of $1,200 per troy ounce. Gold market is in an uprecedented uptrend for the last ten years! In the last decade, many investors turned towards forex after the historic crash in the stock market. Many small investors lost more than 60-70% of their saving accounts in the stock market crash. Now, forex is a great money making opportunity.

It is being said that forex trading will make many millionaires in this decade. Now, many forex brokers also allow you to trade gold in the spot market from the same platform that you trade forex.

If you have been trading forex, you can easily trade gold too. Now when you trade currencies, you take a long or short position on two currencies.

In case of spot gold trading on forex, you trade one ounce of gold in the spot market againt US Dollar (USD). So just like when you trade a currency pair, when you trade gold on forex, you are taking either a long or a short position in gold against USD.

There are many currency pairs that you can trade like the GBPUSD, EURUSD, UADUSD, NZDUSD, JPYUSD. Spot trading gold on forex is almost similar with gold replacing one currency in the pair and the other currency is always USD. Not surprisingly the symbol for gold spot quote is XAUUSD.

The first symbol XAU is simply the gold in troy ounce. So if the gold price quote is 1100 XAUUSD it means that one troy ounce of gold is equal to $1,100. Just like anyother financial market, the price quote in the gold spot market has got a bid/ask spread. So if the price quote is 1110/1115, it means that you can sell one troy ounce of gold in the spot market for $1,110 and buy one troy ounce of gold at $1,115 meaning you will have to pay a spread of $5 per troy ounce when trading in gold in the spot market. Spot gold trading on forex is a fast moving market and the spread keeps on changing throughout the day. Now a standard lot in currency trading is equal to $100,000. But in case of gold on forex, a standard lot is equal to 10 troy ounces of gold. So, if you find the price quote to be 1112/1117 and you are interested in going long.

In that case you will have to buy 1 lot of gold that is equal to $11,170. Spot gold market is a fast moving market and the price quotes keep on changing. So, suppose just after 60 minutes, you find the quote to be 1120/1126.

You see a profit and decide to get out selling at $11,200 making a profit of $30. Now if you had used leverage, you would have needed a much lower initial investment to make a profit of $30 in just 60 minutes. Gold and USD have an inverse correlation relationship. What this means is that the gold prices and USD move in opposite direction in the long term. This inverse relationship may not hold in the short term. But if you are a trend trader or a position trader, you can hedge your position in currency pairs that have correlation with gold prices by taking opposite positions in the spot gold on forex market.
Mr. Ahmad Hassam has done Masters from Harvard University. Download this 1 Minute Swing Trading Forex-4 Pack Training Kit FREE!

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