Trading gold beyond USD-terms

Gold is consistently a highly traded product at Pepperstone and we’re always searching for new ways to deliver the most cutting-edge products in the market.

The most popular way to trade gold is denominated in USD (XAUUSD), but with Pepperstone you can now trade gold against five different currencies. Here’s why you should consider trading gold beyond USD-terms.

Gold has long been rooted in the financial system, carving out a unique position in global economics. Whether long or short, the gold market is highly liquid and presents opportunities to profit on price moves in many financial environments.

The most common way to trade gold is in USD-terms, but if you’re bullish gold and expect the USD to be strong at the same time, one way to maximise the profit on trade is to consider gold against a currency you think might fall in value. If the trade goes as planned, the trader has boosted potential profits by not only gold appreciation but a positive currency effect too.

As an example, when gold traded to a record high in GBP-terms in May 2020, it was partially a stronger gold price, and also due to considerable GBP weakness at the time.

And it’s the opposite if short gold: Here if you believe gold will fall but are worried about USD weakness, traders can maximise return by shorting gold in the perceived strongest currency.

Adding a currency consideration obviously adds an extra layer of complication. However, generally there’s a strong overlap, with many gold traders also being active in FX markets anyhow. The choice of underlying currencies lets traders combine both skill-sets and enhance their trading strategies.

This matters even more in current economic conditions

Gold in USD-terms (XAUUSD) hasn’t hit a record high since 2011, due to persistent USD-strength. Oftentimes, gold moves in the same direction as the US dollar, which limits profit opportunities.

Instead, traders are trying alternative strategies, considering gold beyond USD-terms and now in terms of the British pound (GBP) and the Swiss franc (CHF). This builds on our previous offering of USD, AUD, and EUR.

Gold traded to a record high against the Australian dollar (XAUAUD) early in the pandemic sell-off, hitting a record 2765 on 24 March. More recently, gold traded to record valuations in EUR and GBP terms due to underlying currency weakness in a global flight to safety.

Even gold against the Swiss franc (CHF) has performed exceptionally well recently. Although you might expect CHF to be strengthening due to its role as a safe haven currency, the Swiss National Bank seems to be pegging the currency to the euro. So when XAUEUR hit a record high on 18 May this year, so too did XAUCHF.

Trade the new gold offerings with great pricing

With minimum spreads of just 0.08, Pepperstone offers great pricing on the new gold products. Since launching in April 2020, the average XAUGBP spread is 0.38 and XAUCHF 0.41.

Take a view

Enhance your trading strategy with Pepperstone’s expanded gold offering. When you take a view on gold, you can also take a view on which currency you think will move most in the opposite direction in order to maximise profits - but don’t forget it could also increase losses if the markets were to move against you. 

Keep up to date with our latest research in the market analysis section, where we argue the case for gold is as bullish as ever.

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Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information provided here, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.