Gold and silver explained: what moves precious metals and how they trade

Gold and silver are precious metals that trade around the clock on weekdays, priced in US dollars per troy ounce. Gold is held mainly as a store of wealth by central banks, investors and jewellery buyers, and pays no income; silver has the same monetary history but is also an industrial metal, used in electronics and solar panels. The factors most often linked to their prices are real interest rates, the US dollar, central-bank demand and demand for safe havens during periods of stress.

For traders, the metals are quoted much like currency pairs (XAU/USD for gold, XAG/USD for silver), which makes them look familiar. But their drivers, contract sizes, leverage limits and trading hours are different. This guide explains those differences. For a detailed profile of gold as a trading instrument, including pip values and session behaviour, see our XAU/USD profile.

Units and quotes

Precious metals are measured in troy ounces, not the ounces used for food. One troy ounce is 31.1035 grams, about 10% heavier than an ordinary (avoirdupois) ounce. A kilogram is about 32.15 troy ounces.

The quote symbols come from the ISO currency codes for the metals: XAU is gold and XAG is silver. A quote of XAU/USD means the price of one troy ounce of gold in US dollars, so gold is treated like a base currency in a currency pair. Metals can also be quoted against other currencies, for example XAU/EUR, and the euro price will move with both the dollar price of gold and EUR/USD.

Prices move in small increments. Gold CFDs are typically quoted to two decimal places (0.01 dollars) and silver to three (0.001 dollars), though conventions vary by platform.

Where the price comes from

The London over-the-counter market

Most physical gold and silver trading takes place over the counter in London, between banks, refiners, central banks and large dealers, in the market overseen by the London Bullion Market Association (LBMA). Trades are for metal held in London vaults ("loco London") and settle two business days later, much like spot forex.

Twice each London business day, at 10:30 and 15:00 London time, an electronic auction run by ICE Benchmark Administration sets the LBMA Gold Price in US dollars. The LBMA Silver Price is set once a day, at 12:00 London time. These benchmarks are used to value contracts, funds and central-bank reserves. They are snapshots: the market trades continuously between them.

Futures exchanges

The other main venue is the futures market, above all COMEX in New York, part of CME Group. The standard COMEX gold futures contract is for 100 troy ounces and the standard silver contract for 5,000 troy ounces, with smaller versions also listed. Futures trade almost 23 hours a day during the week and are very liquid in the nearest active contract.

A futures price is normally a little higher than the spot price, because holding metal until a future date costs money (financing) but earns nothing, unlike a currency, which earns interest. That difference is the cost of carry; how commodity futures work explains it, including contango and rollover. For gold the gap between spot and near futures is usually small and fairly stable, because gold is plentiful above ground and easy to store. Large, sudden gaps between London and New York prices are rare but have happened during episodes of logistical disruption.

How CFD providers price metals

Retail gold and silver CFDs are priced from these markets. Spot (cash, undated) CFDs track the spot price and charge daily financing; futures-based (dated) CFDs track a specific COMEX contract, build the carry into the price and expire. The trade-offs between the two, a tighter spread with daily financing against a wider spread with expiry, are the same as for indices and other commodities; CFDs on stocks, indices and commodities compares them across asset classes.

What tends to move gold

There is no single formula for the gold price. Below are the drivers most often discussed by analysts and the industry, with the caveats each one deserves.

Real interest rates

Gold pays no interest or dividend. Holding it means giving up the yield you could earn on cash or bonds. The relevant yield is the real one: the nominal interest rate minus expected inflation, often measured using inflation-linked government bonds such as US TIPS. When real yields are high, the opportunity cost of holding gold is high; when they are low or negative, it is low.

For many years, gold and US real yields tended to move in opposite directions. But the relationship is not a law. From 2022, real yields rose sharply as central banks raised rates, and gold did not fall in the way the old relationship would have suggested, which many analysts attributed partly to heavy central-bank buying. Treat real yields as one important input, not a model. Our guides to bonds and yields and central banks and interest rates explain where these rates come from.

The US dollar

Because gold is priced in dollars, a weaker dollar makes it cheaper for buyers using other currencies, and a stronger dollar makes it dearer. Over time gold has often moved inversely to the dollar index, but the two can rise together, especially during periods of broad stress when both are sought as safe havens.

A practical consequence: a move in XAU/USD can come from gold or from the dollar. If gold rises in dollars but is flat in euros, the move was mostly about the dollar.

Central-bank buying

Central banks hold gold as part of their reserves. According to World Gold Council estimates, central banks bought more than 1,000 tonnes of gold in each of 2022, 2023 and 2024, far above the levels of the previous decade. Reasons cited by central banks in surveys include diversification away from reliance on any single currency and gold's lack of counterparty risk. This demand is not driven by short-term price moves, and it is reported with a delay and partly estimated, so it is better understood as a background force than as something to trade on day by day.

Safe-haven and risk-off demand

Gold is often described as a safe haven: an asset investors buy in periods of fear, such as financial crises, wars or market crashes. There is some historical support for this, but it is inconsistent. In acute liquidity crunches, when investors sell whatever they can to raise cash or meet margin calls, gold has sometimes fallen alongside shares before recovering. Describing gold as a safe haven is a statement about its behaviour in some past episodes, not a guarantee.

Inflation

Gold is widely associated with protection against inflation, but the evidence depends heavily on the time frame. Over very long periods, some argue it has roughly held its purchasing power; over periods of several years it has often moved in ways unrelated to inflation. What matters more for short-term pricing is how inflation affects expectations of interest rates.

Physical demand

Jewellery buying, especially in China and India, and bar and coin demand add a physical layer to the market. They tend to be price-sensitive: high prices discourage jewellery demand. Seasonal patterns around festivals and weddings are often discussed, but they are small compared with financial flows.

Investment flows

Gold-backed exchange-traded funds hold physical metal on behalf of their investors. Large inflows or outflows can add to or ease demand. Positioning data from the futures market, such as the US CFTC's Commitments of Traders report, is also watched as a gauge of speculative positioning. See our guide to ETFs for how physically backed funds work.

What makes silver different

Silver shares most of gold's drivers, but with two important differences.

Industrial demand. A large share of silver demand, around half or more in recent years according to industry surveys published by the Silver Institute, comes from industry: electronics, solar panels, brazing alloys and other uses. That ties silver more closely to the economic cycle and manufacturing activity than gold.

A smaller, less liquid market. The silver market is much smaller in value than the gold market, so the same amount of buying or selling moves it further. Historically, silver has been noticeably more volatile than gold, with larger daily ranges in percentage terms and sharper falls in sell-offs. Spreads on silver CFDs are typically wider relative to price as well.

This is why ESMA treats the two differently: gold CFDs can be offered to EU retail clients at up to 20:1 leverage, but silver falls under "other commodities" at up to 10:1.

The gold/silver ratio

The gold/silver ratio is the price of gold divided by the price of silver: how many ounces of silver it takes to buy one ounce of gold. If gold is 2,400 dollars and silver is 30 dollars (illustrative numbers only), the ratio is 80.

The ratio has moved over a wide range in modern markets. It rose above 100 during the market turmoil of March 2020, when silver fell much harder than gold, and has spent long periods at lower levels. Some traders compare the current ratio with its history to judge which metal has been relatively stronger, and some trade the ratio itself by going long one metal and short the other.

Two cautions. First, there is no "correct" level for the ratio; the historical range is just history, and the economic reasons silver and gold are valued differently change over time. Second, a ratio trade is two leveraged positions, with two spreads, two financing charges and two sets of margin. It is not a low-risk hedge.

Contract sizes and worked examples

Contract sizes for metal CFDs vary between providers. A common convention is that one standard lot of gold is 100 troy ounces, matching the COMEX contract, and one standard lot of silver is 5,000 troy ounces, but many providers use different sizes and allow fractions. Always read the contract specification.

Worked example: gold

Illustrative numbers only. Gold is quoted at 2,400.00 / 2,400.40. One lot is 100 troy ounces. You buy 0.10 lots (10 ounces) at 2,400.40.

• Exposure: 10 × 2,400.40 = 24,004 dollars.
• Minimum margin at 20:1 (5%): about 1,200 dollars.
• Each 1.00 dollar move in the gold price is worth 10 dollars on this position.
• If gold falls 3%, about 72 dollars, the loss is about 720 dollars: 60% of the margin.

Worked example: silver

Illustrative numbers only. Silver is quoted at 30.000 / 30.030. One lot is 5,000 ounces. You buy 0.10 lots (500 ounces) at 30.030.

• Exposure: 500 × 30.030 = 15,015 dollars.
• Minimum margin at 10:1 (10%): about 1,500 dollars.
• Each 0.10 dollar move in silver is worth 50 dollars.
• If silver falls 6%, about 1.80 dollars, the loss is about 900 dollars: 60% of the margin.

Note that in these illustrations silver needed a larger percentage move to cause the same proportional damage, because the leverage cap is lower. That does not make silver safer: its moves have historically been larger. Use the margin calculator and the position size calculator to check exposure before trading, and read about leverage and margin if any of this arithmetic is unfamiliar.

Account currency

Metals are quoted in dollars. If your account is in euros or pounds, profits, losses and margin are converted, and the exchange rate adds another source of movement and possibly a conversion fee. See currency conversion and account base currency.

Trading hours and liquidity

Spot gold and silver trade nearly continuously from the Sunday evening open in Asia to the Friday close in New York, with a short daily break at many providers around the US futures maintenance window. Activity is usually heaviest when London and New York are both open, and around the London benchmark auctions and major US data releases. It is usually thinnest late in the US afternoon and early in the Asian session. The market hours tool shows the main sessions in your time zone.

Weekend gaps happen in metals as they do in currencies and indices: news over the weekend is priced in at the Sunday open, sometimes well away from Friday's close. Stop-losses can be filled beyond their level in a gap; see gap risk and weekend risk.

Financing on metal CFDs

Spot metal CFDs held past the daily cut-off are charged overnight financing, usually based on a dollar interest rate plus a markup for longs. Because gold itself earns nothing, long positions almost always pay financing, and when dollar rates are high the cost of holding a leveraged long for months becomes significant. Shorts may receive a small credit or also pay, depending on the provider's markup. The mechanics are the same as currency swaps; see swap and overnight financing.

Common mistakes

• Treating gold as a guaranteed safe haven. It has fallen during some crises, and a leveraged position can be closed out before any recovery.
• Assuming a fixed relationship with real yields or the dollar. These relationships are tendencies that have broken down for long periods.
• Sizing silver like gold. Silver has historically been more volatile, and its contract sizes and leverage limits differ.
• Comparing lots across providers. One provider's lot of gold is not necessarily another's. Work in ounces and dollars per move.
• Ignoring financing on long-term holds. Gold pays no income, so a leveraged long pays to be held.
• Reading the gold/silver ratio as a signal. It describes relative prices; it does not say what will happen next.

Most retail CFD accounts lose money, and metals are no exception. Before trading, read the risk warning and the provider's contract specifications.

Frequently asked questions

Why is gold quoted as XAU/USD?

XAU is the ISO 4217 code for one troy ounce of gold, used in the same system as currency codes. XAU/USD is therefore the price of one troy ounce of gold in US dollars, written the same way as a currency pair. Silver is XAG, platinum XPT and palladium XPD.

What is a troy ounce?

A unit of weight used for precious metals, equal to 31.1035 grams. It is about 10% heavier than the ordinary ounce used for food and household goods.

Why does gold often fall when interest rates rise?

Because gold pays no interest, higher real interest rates raise the cost of holding it compared with interest-bearing assets. The relationship is a tendency, not a rule: it weakened considerably from 2022, when gold held up despite rising real yields.

Is silver riskier than gold?

Historically silver has been more volatile than gold, partly because its market is smaller and partly because industrial demand ties it to the economic cycle. EU rules reflect this by capping retail leverage on silver CFDs at 10:1, compared with 20:1 for gold.

What is the difference between spot gold and gold futures?

Spot gold is metal for near-immediate settlement, mostly traded over the counter in London. Gold futures are exchange-traded contracts for delivery on a future date, mainly on COMEX. Futures usually trade slightly above spot because of financing costs until delivery.

Do central banks still buy gold?

Yes. According to World Gold Council estimates, central banks bought more than 1,000 tonnes in each of 2022, 2023 and 2024. Purchases are reported with a delay and some are estimated, so annual figures are revised over time.