One headline. More than one reason for the price to move.
What moves gold?
In one second
Gold is pulled by four ropes: the dollar, interest rates, fear, and demand and momentum. Their strength and direction change from one day to the next.
In one second
- A stronger dollar does not always mean weaker gold — but look at it first.
- Interest rates are the yardstick for the appeal of holding something other than gold.
- Not “crisis, so up”: watch where money runs for shelter.
- Prices move on the amounts bought and sold, not on reasons.
Up or down? First, look at the forces.
The arrows are not prophecies of a rise or a fall. They show which way pressure tends to point, all else being equal.[1]
Gold’s price tag is written in dollars.
XAU/USD shows how many US dollars one troy ounce of gold is worth. In general, a stronger dollar makes gold dearer for buyers using other currencies, which can push the other way.[3]
Gold itself pays no interest.
When deposits and bonds offer attractive yields, the opportunity cost of holding gold, which pays nothing, tends to rise. Expectations of falling rates can lighten that weight.
Fear looks for shelter.
When worries about markets or politics grow, demand to diversify can flow into gold. But the price does not always rise the moment fear appears; selling to raise cash can come first.
What finally moves it is real buying and selling.
Investment money, central banks, jewellery, technology, recycling and mine supply, with orders chasing the price on top. Even when a story is right, the reaction is small if it is already in the price.[2]
Even on the same day, there is more than one reason.
Four deeper notes
An inverse relationship is not a rule.
The dollar and gold, and rates and gold, often move in opposite directions, but the strength of that link is not fixed. When fear or inflows are stronger, they can move together.
Physical gold and a CFD are not the same thing.
Owning bullion and trading the price movements of XAU/USD are different. Check ownership, term, costs, leverage and settlement separately.
A troy ounce is not an everyday ounce.
International gold prices are usually quoted in US dollars per troy ounce. In a product specification, check how many ounces one lot represents and what the minimum trade size equals.
The gap to expectations matters more than the news.
Markets react not only to the number announced but to its gap from forecasts and to expectations for the next policy step. “Good news, yet it fell” may be the unwinding of a trade that ran ahead.
The order in which to read gold news.
- Is the price XAU/USD, or spot, futures or a CFD?
- Is the US dollar strong or weak against the major currencies?
- Which way did bond yields and the rate outlook move?
- Is this a new worry, or one already known?
- Are investment flows through ETFs and futures continuing?
- Are changes in central banks, jewellery, technology and supply short-term or long-term?
- Is the story already in the price?
The four forces can cancel or amplify one another. This is an order of observation, not a price forecast or a recommendation to trade.
Next, the distance at which a price move reaches your account.
Once you have seen what moves the price, measure how that move travels into a leveraged trade.
PREVIOUS · 001That “account” — is it a bank account?NEXT · 003Leverage is a distance, not a multiple.See the Field Notes shelf →