In the Forex market, gold is a form of currency and so is silver. They can be traded in the same way as other currencies. However there is a difference: gold and silver can only be traded against United States dollars (USD).

The internationally accepted code for gold is XAU, the silver code is XAG. The codes are built from X in Forex and the chemical sign for gold (AU) and silver (AG).

The price of gold is measured by its weight. The price shows how much it costs for one ounce of gold in US dollars. There are several methods of weight measurement in the special metals and stones markets. The most common is troy - a troy ounce equals about 31.10 grams; an avoirdupois ounce equals about 28.35 grams.

For example, if the gold price is 612.97, it means that an ounce of gold is traded for 612.97USD. Similarly, the price of silver is its price per ounce in USD. If the silver price is 11.853, it means that an ounce of silver is traded for 11.853USD.

Forex trading with gold and silver rates is done in the same way as with foreign currencies. Trading is performed directly between the seller and the buyer (via the internet trading platform), and no other people or organizations are involved.

Like foreign currency rates, trading with gold or silver rates does not require the "physical" purchase or sale of the real material. Using the example above, if you buy Forex gold for 612.97USD, you do not have an ounce of gold that you can hold, but you rather have the obligation to buy XAU at $612.97. When you close your Forex deal, you sell the XAU (gold) and close your obligation. If you sell it for $615.00, you have made profit of $3.03 for every ounce (unit) of gold in your contract.

Rising gold prices can affect other currencies. Higher gold prices can be especially important to the currencies of major gold-producing countries. Australia is the world's third largest exporter of gold, and Canada is the world's third largest producer of gold. So, if you believe the price of gold will continue to rise, you can establish trades in the Australian dollar or the Canadian dollar because those currencies will likely become stronger.

In the Forex market, gold is neutral – that means that gold is not related to any one country, so the rising price influences trades in several currencies. Gold prices can rise when the political or economic situation in United States is changing. If the gold price starts to increase, you might expect it to go higher in the next periods of trading. With this expectation, traders might decide to sell US dollars and buy euros because they believe US dollars will fall in value and euros will increase.

Gold prices are an important driver of the foreign exchange market.

To establish a Forex deal on gold (XAU) or silver (XAG), open an account for free.

Easy-Forex^® traders who want to perform trading with gold or silver rates can regard the gold (XAU) and silver (XAG) just as they do any other foreign currency. The trade is done only against the US dollar (USD), but in all other ways the process is the same. Find out more about how to perform a Day Trade in gold and silver.

Please note that gold and silver rates are traded worldwide between the hours of 01:00-17:30 GMT, Monday to Friday, and that spreads are usually higher during out-of-business hours.