How to trade gold CFDs (XAU/USD): contract size, pips, margin and position sizing

Trading gold as a CFD means taking a leveraged position on the price of XAU/USD, the US dollar price of one troy ounce of gold, without owning any metal. On most platforms one standard lot is 100 ounces, so every $1 move in the gold price is worth 100 USD per lot, and the margin required by EU-regulated brokers for retail clients is 5% of the position value (20:1 leverage). Before you trade it, check three things in your broker's contract specification: the contract size, what the broker calls a pip, and the swap rates.

This guide is about the mechanics: how the quote works, what each size of trade is worth per move, how margin and costs are calculated, and how to size a position so that one bad trade cannot do serious damage. For why gold moves the way it does, our guide to gold and silver goes into the macro drivers in depth, and our XAU/USD profile covers its history and correlations. All prices in this guide are illustrative examples, not current or expected levels.

What a gold CFD actually is

A contract for difference is an agreement with your broker to exchange the difference in an instrument's price between when you open and when you close. If you buy (go long) XAU/USD and the price rises, the broker pays you the difference multiplied by your position size; if it falls, you pay. You can sell (go short) just as easily, which profits if the price falls and loses if it rises.

You never own gold, never take delivery and have no claim on any bar in a vault. You are also trading against or through your broker, which sets its own prices derived from the underlying market, its own trading hours and its own contract terms. That is why two gold CFDs on two platforms can look identical on screen and still behave differently in money terms.

Most retail CFD accounts lose money. Brokers in the EU must publish the percentage of their retail accounts that lose, and those figures commonly sit well above half; leverage is a large part of the reason. Our guide to why most retail CFD traders lose explains the data. Gold, with its large moves in money terms, is an instrument where that risk shows up quickly.

Reading the XAU/USD quote

XAU is the ISO code for one troy ounce of gold (about 31.1 grams). XAU/USD is quoted like a currency pair: gold is the base, the US dollar is the quote currency, and the number tells you how many dollars one ounce costs. A quote of 4,000.00 (an example price) means one ounce costs four thousand dollars.

Like any forex quote, there are two prices. The bid is the price you can sell at, and the ask is the price you can buy at. If a platform shows 4,000.00 bid and 4,000.30 ask, the spread is 0.30, or 30 cents per ounce. You buy at the higher price and sell at the lower one, so every trade starts slightly behind. Our guide to reading a forex quote covers the bid/ask mechanics in more detail.

Gold is normally quoted to two decimal places, so the smallest price step is usually 0.01, one cent per ounce. Some platforms show three decimals. The number of decimals matters less than the question of what your broker calls a pip, which we come to next.

Contract size: what one lot of gold means

With currency pairs, a standard lot is 100,000 units of the base currency almost everywhere. With gold, the common convention is that one standard lot is 100 troy ounces, matching the size of the main gold futures contract traded on COMEX in New York. On that basis:

• 1.00 lot = 100 ounces
• 0.10 lots (a mini lot) = 10 ounces
• 0.01 lots (a micro lot) = 1 ounce

That is the most common set-up, but it is not universal. Some brokers define a gold lot as 10 ounces, some as 1 ounce, and some let you trade in ounces directly rather than lots. If you move between platforms, or between an MT4 account and a different platform at the same broker, check the contract specification each time. Mistaking a 1-ounce contract for a 100-ounce contract, or the other way round, is a hundredfold error in your risk.

On MetaTrader platforms you can usually right-click the symbol in Market Watch and open its specification, which lists the contract size, digits, swap rates, trading hours and margin terms. Brokers also publish these on their websites. Read them before your first trade, not after.

Pips and points on gold: two conventions

On EUR/USD a pip is 0.0001 and nobody argues about it. On gold, brokers genuinely differ:

• Convention A: a pip is 0.01. A move from 4,000.00 to 4,000.01 is one pip. A $1 move is 100 pips. This is the convention our own XAU/USD profile uses.
• Convention B: a pip is 0.10. A move from 4,000.00 to 4,000.10 is one pip. A $1 move is 10 pips, and the 0.01 step is called a point or pipette.

Some traders and commentators also talk about whole dollars, saying gold "moved 20 points" when they mean $20 per ounce. And on MetaTrader, the platform's own "points" are always the smallest price increment, which is a different thing again.

Why it matters: imagine two brokers both advertising a gold spread of "30 pips". Under convention A that is 0.30, or 30 USD per standard lot. Under convention B it is 3.00, or 300 USD per standard lot. The same wording describes costs that differ by a factor of ten. The same confusion applies to stop distances quoted in pips in courses, forums and signal channels.

The fix is simple: stop thinking in pips for gold and think in dollars per ounce. A stop "12.50 below entry" or a spread of "0.30" means exactly one thing, whatever the platform calls a pip. Our general guide to what a pip is explains the currency conventions, and the pip value calculator helps once you have confirmed your broker's contract size and pip definition.

What each move is worth: the dollar maths

Because gold is quoted in US dollars, the arithmetic is straightforward for a dollar account. Profit or loss equals the price change in dollars per ounce multiplied by the number of ounces. Assuming a 100-ounce standard lot:

A move of 0.01 (one cent)

• 1.00 lot (100 oz): 0.01 × 100 = 1 USD
• 0.10 lots (10 oz): 0.10 USD
• 0.01 lots (1 oz): 0.01 USD

A $1 move

• 1.00 lot: 1 × 100 = 100 USD
• 0.10 lots: 10 USD
• 0.01 lots: 1 USD

A $10 move

• 1.00 lot: 10 × 100 = 1,000 USD
• 0.10 lots: 100 USD
• 0.01 lots: 10 USD

Now put those numbers next to how gold actually behaves. Moves of several dollars in a few minutes around major US data are routine, and daily ranges of tens of dollars are common, especially at higher price levels. A $10 move against a one-lot position is a 1,000 USD loss; a $30 move is 3,000 USD. On a 5,000 USD account, that second number is 60% of the balance.

This is the single most important thing to understand about gold CFDs: the platform lets you click "1.00" in the volume box just as easily as on EUR/USD, but the money per move is very different. On EUR/USD at an illustrative 1.1000, a 1% move is 110 pips, worth about 1,100 USD on a standard lot. On gold at 4,000, a 1% move is $40, worth 4,000 USD on a standard lot. Same click, nearly four times the swing in this example.

Worked example: a profitable and a losing trade

Example only. You buy 0.10 lots (10 ounces) of XAU/USD at an ask of 4,000.30. Later, the bid is 4,012.80 and you close.

• Price change: 4,012.80 − 4,000.30 = 12.50 dollars per ounce
• Result: 12.50 × 10 ounces = 125 USD, before any swap

Now the same trade going the other way: the bid falls to 3,987.80 and your stop closes you out.

• Price change: 3,987.80 − 4,000.30 = −12.50
• Result: −12.50 × 10 = −125 USD

Notice that the spread is already built into these numbers because you bought at the ask and sold at the bid. If your account is in euros or pounds, the dollar result is converted at the prevailing exchange rate, which adds its own currency effect; see currency conversion and account base currency.

Margin on gold under ESMA's 20:1 cap

Margin is the deposit your broker holds while a leveraged position is open. It is not a fee, but it does limit what else you can do with the account, and if your equity falls too far your positions are closed automatically.

For retail clients of EU-regulated brokers, ESMA's leverage limits cap gold at 20:1. That means the initial margin is at least 1/20, or 5%, of the position's notional value. Gold sits in the same band as major stock indices and non-major currency pairs; other commodities, including silver, are capped at 10:1. Our guide to ESMA leverage limits and negative balance protection sets out the full table, and the UK FCA applies the same caps. Professional clients and clients of brokers outside the EU and UK may be offered higher leverage, which magnifies losses as well as gains.

Worked example: margin at 20:1

Example only, with gold at 4,000.00 and a 100-ounce lot:

• Notional value of 1.00 lot: 100 × 4,000 = 400,000 USD
• Margin at 20:1: 400,000 ÷ 20 = 20,000 USD
• Margin for 0.10 lots: 40,000 ÷ 20 = 2,000 USD
• Margin for 0.01 lots: 4,000 ÷ 20 = 200 USD

Two practical points follow. First, margin on gold scales with the price: when gold is twice as expensive, the same lot needs twice the margin. Second, margin tells you nothing about risk. A 0.10-lot position needs 2,000 USD of margin in this example, but the amount you can lose on it depends entirely on how far the price moves against you, which is why you size from your stop, not from your margin.

Under ESMA rules your broker must close positions when your equity falls to 50% of the margin required to keep them open (the margin close-out rule), and negative balance protection means a retail client cannot lose more than the money in the account. Fast gold moves around data can still take you to close-out quickly. Our guides to leverage and margin and margin calls and stop-outs walk through margin levels step by step, and the margin calculator works out the figure for any size and price.

Spreads and other trading costs

Gold CFD costs come in three main forms: the spread, any commission, and overnight financing (swap).

The spread

Gold spreads are normally wider than on the main currency pairs in relative terms, and they vary through the day. They tend to be tightest when London and New York are both open, and wider in the quieter Asian hours, around the daily break near the US close, at the weekly open on Sunday evening, and in the seconds around major US releases. The figure on a broker's website is often a minimum or an average; the spread you pay is the one showing when you click.

Example only. With a spread of 0.30:

• 1.00 lot: 0.30 × 100 = 30 USD per round trip
• 0.10 lots: 3 USD
• 0.01 lots: 0.30 USD

If the spread widens to 1.00 during a news release, the cost on one lot becomes 100 USD before the price has moved at all. Our guides to spreads and commissions and why spreads widen explain how to check typical rather than minimum spreads.

Commission

Some account types charge a commission per lot instead of, or as well as, a marked-up spread. When comparing, add them together to get an all-in cost per round trip, in dollars, for the size you actually trade.

Swap (overnight financing)

If you hold a gold CFD past the broker's daily cut-off, usually around the US close, a financing adjustment is applied. Gold pays no interest of its own, so the charge is generally based on a US dollar interest rate benchmark plus the broker's mark-up. In practice, long positions have typically paid financing, and short positions may pay a smaller amount or receive a little, depending on the broker and on interest rates at the time. Brokers usually apply three days' financing on one weekday to cover the weekend; for metals that day differs between brokers, so check which one yours uses.

Example only, using an assumed all-in annual financing rate of 6% on a long position:

• Notional of 1.00 lot at 4,000: 400,000 USD
• Daily charge: 400,000 × 0.06 ÷ 365 ≈ 65.75 USD per night
• On 0.10 lots: about 6.58 USD per night

Over a month that adds up to a meaningful cost on a position that has gone nowhere. Your platform shows the actual swap rates in the contract specification, often expressed in points per lot per night rather than as a percentage. Our guide to swap and overnight financing explains the calculation in detail.

Trading hours, sessions and liquidity

Gold CFDs typically trade from Sunday evening to Friday evening, almost 24 hours a day, with a short daily break around the US close. The exact hours vary by broker and shift by an hour around the dates when the UK and US change their clocks. Times below are UK time and approximate:

• Asian hours (around 23:00 to 07:00): gold trades actively, with physical demand from Asia, but it is usually quieter than later in the day and spreads can be wider.
• London (around 08:00 to 17:00): liquidity builds as the London bullion market opens. The LBMA Gold Price benchmark auctions take place at 10:30 and 15:00 London time.
• London and New York overlap (around 13:00 to 17:00): usually the most active period. US economic data released at 08:30 New York time lands at 13:30 UK time for most of the year, and COMEX futures trading adds volume.
• Late New York and the daily break (around 21:00 to 23:00): liquidity thins, spreads widen, and the swap is applied.

Our market hours tool converts these sessions into your own time zone.

Two features of gold's timetable deserve particular care. The weekly open on Sunday evening can gap away from Friday's close if anything significant happened over the weekend, and a stop loss does not protect you at the stop price in a gap; it is filled at the first available price. And around major US releases, prices can jump several dollars in a second, with slippage on market and stop orders common. Our guide to gap risk and weekend risk covers both.

What moves gold: the short version

This guide does not repeat the full analysis in our gold and silver guide, but a CFD trader should know the main forces that have historically been linked to the gold price:

• Real interest rates. Gold pays no interest, so when inflation-adjusted yields on government bonds rise, the opportunity cost of holding it rises, and the reverse when they fall. The relationship has been strong at some times and weak at others.
• The US dollar. Because gold is priced in dollars, a broadly stronger dollar has often coincided with a lower gold price, though they have sometimes risen together.
• Central-bank buying. Central banks have been large buyers in recent years, mostly for reserve diversification rather than short-term trading.
• Safe-haven demand. Geopolitical shocks and financial stress have often brought buyers into gold as a safe haven, although in acute liquidity crunches it has also been sold to raise cash.
• Scheduled US events. Non-farm payrolls, CPI and Federal Reserve decisions move both the dollar and real yields, so they tend to be the most volatile scheduled moments for gold. Our guide to how economic data moves forex explains the surprise-versus-consensus logic, which applies to gold too.

None of these is a trading rule. They describe tendencies that have held over some periods and failed over others, and they say nothing about what gold will do next.

Position sizing for gold

Position sizing turns "I am prepared to lose this much on this trade" into an exact number of lots. The method is the same as for currencies, and it is covered in full in our position sizing guide. For gold, the formula in a dollar account is:

• Lots = money at risk ÷ (stop distance in dollars per ounce × ounces per lot)

Worked example: a dollar account

Example only. Your account balance is 10,000 USD and you risk 1% per trade, so the most you are prepared to lose is 100 USD. You plan to buy gold at 4,000.00 with a stop at 3,987.50, a stop distance of 12.50 dollars per ounce. Your broker uses 100-ounce lots.

1. Risk per standard lot: 12.50 × 100 = 1,250 USD
2. Lots: 100 ÷ 1,250 = 0.08 lots
3. Add a cushion for the spread. With a spread of 0.30, the effective stop distance from your buy price is about 12.80: 100 ÷ (12.80 × 100) = 0.078, which you round down to 0.07 lots.
4. Check margin: 7 ounces × 4,000 = 28,000 USD notional, ÷ 20 = 1,400 USD margin.

So 0.07 lots risks a little under 100 USD if the stop is filled at its level, and ties up 1,400 USD of margin. Compare that with the beginner who simply opens 1.00 lot because there is enough free margin: the same 12.50 stop would cost 1,250 USD, or 12.5% of the account, on one trade.

Always round down, never up. And remember that on gold, slippage around data can push the real fill beyond your stop, so the actual loss can exceed the planned figure.

Worked example: a euro account

Example only. Your balance is 5,000 EUR, you risk 1% (50 EUR), and EUR/USD is at an illustrative 1.1000, so your risk in dollars is 50 × 1.1000 = 55 USD. Your stop is 8.00 dollars per ounce away.

1. Risk per ounce: 8.00 USD
2. Ounces: 55 ÷ 8 = 6.875
3. At 100 ounces per lot, that is 0.06875 lots, rounded down to 0.06 lots (6 ounces)

Your maximum planned loss is 6 × 8 = 48 USD, or about 43.6 EUR at that exchange rate. Note that the euro value of an open gold position also moves with EUR/USD.

The position size calculator does this arithmetic for you, including the currency conversion. Enter the contract size your broker actually uses; if your broker's gold lot is not 100 ounces, adjust the numbers accordingly.

Why stops on gold tend to be wider in dollars

Because gold routinely moves several dollars in normal conditions, a stop only one or two dollars away is likely to be hit by ordinary noise. Many traders therefore use wider stops in dollar terms on gold, which, for a fixed money risk, means smaller position sizes. That is the trade-off working as intended: a wider stop with a smaller size can carry the same money risk as a tight stop with a larger size.

Common mistakes with gold CFDs

• Assuming 1 lot of gold is like 1 lot of EUR/USD. In money per percentage move, one lot of gold at the example price above moves several times more. Start from the dollars-per-move table, not habit.
• Confusing pip conventions. Reading a "50-pip stop" from a course written for a 0.10 pip convention and placing it on a platform that uses 0.01 means your stop is ten times closer than intended. Translate everything into dollars per ounce.
• Not checking the contract size. A platform where one lot is 1 ounce and one where it is 100 ounces both display "1.00". Check the specification on every new account.
• Sizing from free margin. Margin shows what you can open, not what you can afford to lose. Size from your stop and risk percentage, then check the margin.
• Holding through US data without a plan. Payrolls, CPI and Fed decisions can move gold sharply, widen spreads and cause slippage. Decide in advance whether to hold, reduce or stay flat.
• Ignoring swap on long-held positions. A long gold position held for weeks can pay noticeable financing, which eats into any gain and adds to any loss.
• Forgetting the weekend gap. Friday's close and Sunday's open can be dollars apart. A stop does not fill at its level in a gap.
• Treating gold's "safe haven" reputation as protection. A safe-haven tendency in the underlying metal does not make a leveraged CFD position safe. Leverage magnifies losses whatever the instrument.

Practising on a demo account with the same contract specification as the live account is a sensible way to see these numbers move before real money is involved. Our guide to CFDs on stocks, indices and commodities shows how these contract terms compare across other asset classes.

A pre-trade checklist for XAU/USD

1. Confirm the contract size (ounces per lot) and the pip definition in the contract specification.
2. Decide where the trade is wrong and set the stop distance in dollars per ounce.
3. Decide the money at risk, as a percentage of your balance.
4. Calculate the lot size, include the spread, and round down.
5. Check the margin required and the margin level after opening.
6. Check the economic calendar for US data or Fed events during the time you expect to hold.
7. Check the swap rate and triple-swap day if you might hold overnight or over a weekend.

Frequently asked questions

How much is 1 lot of gold worth per $1 move?

With the common contract size of 100 troy ounces, a $1 move in XAU/USD is worth 100 USD per standard lot, 10 USD on 0.10 lots and 1 USD on 0.01 lots. If your broker uses a different contract size, multiply the move by the number of ounces you actually hold.

Is a gold pip 0.01 or 0.10?

It depends on the broker. Many treat 0.01 as a pip and some treat 0.10 as a pip, calling 0.01 a point. Both are in use, which is why a spread or stop quoted in pips can be misleading. Check your broker's contract specification and work in dollars per ounce.

How much margin do I need to trade gold?

For EU and UK retail clients, gold is capped at 20:1 leverage, so the margin is 5% of the position's value. At an example price of 4,000, one 100-ounce lot has a notional value of 400,000 USD and needs 20,000 USD of margin; 0.01 lots needs 200 USD. Margin rises and falls with the gold price.

What is the smallest gold position I can trade?

On many platforms it is 0.01 lots, which is 1 ounce on a 100-ounce contract, where a $1 move is worth 1 USD. Some brokers offer smaller contracts or allow trading in ounces. The minimum trade size is listed in the contract specification.

When is gold most active?

Usually during the London and New York overlap, roughly 13:00 to 17:00 UK time, when US data is released and futures volume is highest. The Asian session and the period around the daily break near the US close tend to be quieter, with wider spreads.

Is trading gold CFDs riskier than trading forex?

Gold has generally been more volatile than the major currency pairs, and a standard lot of gold is worth much more per percentage move than a standard lot of EUR/USD at typical prices. With correct position sizing the money risk can be kept the same, but the same lot size carries more risk on gold. As with any leveraged CFD, most retail accounts lose money.