XAU/USD Explained: Contract Specs, Volatility and ATR Stops

What Is XAU/USD and How Is It Quoted?

XAU/USD is one troy ounce of gold, a 31.1035-gram cube barely 12 mm on a side, priced in US dollars. XAU is gold’s ISO currency code, so your platform treats it like a currency pair: gold is the base, the dollar is the quote, and 3,000.00 means one ounce costs three thousand dollars, an example price, not a forecast.

Brokers quote gold to two decimals, so one tick is a cent and the spread is quoted in cents, not pips. You trade it as a CFD (a contract for difference: you get the price change, never the metal) on the same MT4 or MT5 platform as forex. The basics live in the beginner’s guide to trading gold; the live XAU/USD page shows the quote with the daily ATR and pivots.

Contract Specs: What One Lot Really Controls

Five lines in the contract specification decide your risk.

• Contract size: 100 troy ounces per lot at most brokers, so a $1 move is $100 per lot, $10 per 0.10 lot and $1 per 0.01 lot. At the example price of $3,000, one lot controls $300,000 of gold.
• Tick and “pip”: the tick is $0.01. Some brokers call that a point and $0.10 a pip; others call $1 a pip, so a “30-pip stop” could be $0.30, $3 or $30. Count in dollars per lot.
• Minimum lot: usually 0.01, already real money on gold once the stop is wide.
• Stop level: the closest a stop or pending order may sit to the current price; a wide one kills tight intraday stops.
• Swap long and short: the nightly financing charge, tripled one night a week. On gold the long side usually pays.

Lot tables and account-currency conversions are in gold lot size, pip value and margin.

Margin, Leverage and Hedged Margin

Margin is the deposit your broker locks while a position is open: lots × 100 × price ÷ leverage. At the example price of $3,000, one lot is $300,000, so margin is $15,000 at 1:20 (the ESMA cap for gold), $3,000 at 1:100 and $600 at 1:500; the margin calculator does the rest.

Think of it as the deposit on a hire car: not the car’s price, and not the most you can lose if you crash it. Lot size and stop distance set your loss, never the margin.

Most traders believe 1:500 leverage makes a gold trade five times more dangerous than 1:100. It does not: a 0.10 lot with a $30 stop risks $300 at either leverage; only the locked amount differs. Leverage turns dangerous when the freed margin tempts you into more lots.

Hedged margin applies when you hold a long and a short on the same symbol at once, which MT4 and MT5 hedging accounts allow. Brokers differ: margin on the larger side only, a reduced rate on the overlap, or the full amount on both. Check the specification, and remember a locked hedge still pays long swap nightly; it is no free pause button.

Spot Gold vs Gold Futures: Which Price Do You Trade?

Your CFD tracks spot gold, the price for metal delivered now, anchored by the two daily LBMA Gold Price auctions in London at 10:30 a.m. and 3 p.m. The other reference is the COMEX futures contract of 100 troy ounces, which expires and must be rolled. Futures usually sit above spot, a state called contango, by roughly the cost of carrying gold until expiry; a CFD never expires, so the broker charges that carry as nightly swap. Set stops on the price your broker quotes, not the futures screen. The full menu is compared in physical gold vs CFDs, ETFs and futures.

The mechanics of contango, first notice day and the roll are in gold futures vs spot vs CFDs.

Volatility and Session Behaviour

Gold’s annualised volatility has typically been about 15%: roughly double EUR/USD’s, about half silver’s, a fraction of bitcoin’s. A daily range of 1-2% is ordinary, which at the example price of $3,000 is $30 to $60 a day, or $3,000 to $6,000 per standard lot. As the price level rises, the same 1.5% day is more dollars than a year earlier, so compare markets in percent and set stops in dollars.

The clock matters too. On ForexR’s own three-month sample of 1-hour candles, gold’s average hourly range was largest from 8 to 11 a.m. New York time, the London–New York overlap. Most Asian hours were quieter, and nothing traded in the 5 p.m. New York hour, the daily break, when spreads are widest on either side. In Kuala Lumpur or Manila that window is 8 to 11 p.m. in US summer time; six cities’ clocks are in the best time to trade gold.

Gap Risk and Execution at News

A stop-loss on gold is an instruction, not a guarantee: once touched, it becomes a market order and fills at the next available price. Two moments break that promise.

The first is the weekend. Gold reacts to geopolitics, and the market reopens on Sunday at 6 p.m. New York time, often with a gap, so a stop $20 below entry can fill $35 below it. Gold’s largest two-day fall in about 30 years, about 13% over Friday 12 and Monday 15 April 2013, straddled a weekend. Negative balance protection, where offered, caps the damage at your balance.

Then comes US data. NFP and CPI land at 8:30 a.m. New York time and the Fed decision at 2 p.m.; in the seconds around each, spreads widen and quotes jump several dollars at a time, so stops slip and limit orders may not fill. The first-15-minutes pattern and the release clock are in how to trade gold during news; test execution in demo first.

ATR-based Stops: A Worked Example

The problem with fixed stops: the daily ATR of gold can more than double within a few months, so a fixed-dollar stop goes stale (the site’s own daily chart shows one such expansion). A $45 stop that cleared the noise in spring sits inside one ordinary day by summer. The Average True Range tracks the current typical range, so a stop built from it keeps its meaning.

Take a $10,000 account risking 1%, $100 per trade, at the example price of $3,000. With a daily ATR of $30 and a 1.5 ATR stop, $45 from entry, risk per lot is 45 × 100 = $4,500, so lots = 100 ÷ 4,500 = 0.022, rounded down to 0.02. Dollars at risk: 0.02 × 45 × 100 = $90.

Now the ATR doubles to $60. The 1.5 ATR stop becomes $90, risk per lot $9,000, and lots = 100 ÷ 9,000 = 0.011, rounded down to 0.01. Dollars at risk: still $90. Keep the old $45 stop and it is now 0.75 ATR, inside a normal day; keep the old 0.02 lots and you risk $180, almost 2% of the account. The position size calculator does this, but do it by hand once.

How Experienced Traders Size Gold From the ATR

Sizing from the ATR is a habit, and seasoned gold traders share a routine.

• Fix the money, float the lots: set the dollars at risk first and let the ATR and the stop set the lot size; if 0.01 lot already breaks the limit, stand aside.
• Structure first, ATR second: a stop below yesterday’s low that is only 0.6 ATR away is inside the noise; move it or skip the trade.

An engineer in Bangkok who trades gold after dinner copies the daily ATR from the gold analysis hub forecast onto a sticky note. When it moves by more than a fifth she recalculates stop and lot size before the next trade. Her lot sizes shrank through a volatile spring and grew back in a quiet summer; her money at risk never changed.

Try this in five minutes: on a demo daily chart, add ATR(14), note the reading today, three months ago and six months ago, and work out the 1.5 ATR stop and 1% lot size for each. Then compare contract size, stop level, swap and hedged margin on the broker comparison; the differences change results.

On TradingView, the browser-based charting platform, free ATR scripts and a filter for gold-focused scripts in the ForexR Pine Script Library help with the daily ATR step above. Try them on a demo chart first.

Leveraged gold CFDs carry a high risk of loss: gold can fall hard and fast (about 12% in eight trading days in March 2020) and no stop protects you across a gap. ESMA-era disclosures show 74-89% of retail CFD accounts lose money; only risk money you can afford to lose.