What it means
Gold (XAU/USD, GC futures) is one of the most traded. It tends to react to real interest rates, the US dollar and fear in the markets.
In practice
Traders follow commodities for their own trends and as a read on the wider economy. Gold is watched as a gauge of fear and interest rates, oil as a measure of growth and geopolitics. Both have deep futures markets and clear session behaviour.
Because commodities are priced in US dollars, a stronger dollar tends to weigh on them and a weaker dollar to lift them. Scheduled reports, such as the weekly US oil inventory figures, can move the market sharply for a few minutes.
What to watch for
Commodity futures have expiry dates and contract sizes that can be large for a small account: one standard gold contract is 100 ounces. Check which contract month you are trading and consider micro contracts.
Related terms
3 terms- Futures contractA standardised agreement to buy or sell something at a set price on a future date, traded on an exchange.
- Safe havenAssets investors run to when scared, like gold, the yen and the Swiss franc (risk-off); the opposite mood is risk-on.
- CFDA contract with your broker that pays the change in an asset's price; you never own the asset.