Gold (XAU): What Is It? Definition & Explanation

What is gold?

Gold is one of the oldest assets in financial markets, used for thousands of years to build and preserve wealth. Central banks hold it in their reserves, and it is used in everything from jewellery to electronics. Many investors regard gold as a hedge against inflation and currency depreciation.

XAU is the code assigned to gold among international currency codes; the leading "X" marks codes that do not belong to a national currency, such as precious metals. "XAU/USD" means the price of one troy ounce of gold in US dollars. Gold sits among the commodities of traditional finance (TradFi).

What is a troy ounce? Converting to grams

Gold is weighed in troy ounces, not the everyday ounce. According to the conversion table of the US National Institute of Standards and Technology (NIST):

• 1 troy ounce = 31.1035 grams (31.10348 g in the NIST table)
• 1 avoirdupois ounce (the everyday ounce) = about 28.35 grams

When people quote "an ounce of gold", they mean a troy ounce. The price per gram is the ounce price divided by 31.1035. A hypothetical example: at an ounce price of 3,100 dollars, one gram is about 3,100 ÷ 31.1035 ≈ 99.67 dollars (the figure is illustrative, not a current price). Converting into another currency needs an exchange rate, and retail prices add premiums for fabrication, purity and dealer spreads.

In the international wholesale market, the standard is the London Bullion Market Association (LBMA) Good Delivery list. According to the LBMA, a Good Delivery gold bar weighs approximately 400 troy ounces and must meet set requirements for weight, purity and appearance.

How the international gold price is set

Gold does not trade on a single exchange; the London over-the-counter market, futures exchanges and physical markets around the world form its price together. A widely used reference is the LBMA Gold Price. According to the LBMA, it is set twice daily in auctions independently operated and administered by ICE Benchmark Administration (IBA), starting at 10:30 and 15:00 London time, and serves as the global benchmark for unallocated gold delivered in London. Prices during the rest of the day come from continuously traded markets, so small differences between sources at the same moment are normal.

What moves the gold price?

No single factor sets the gold price. Commonly cited drivers (general relationships, not forecasts):

• Real interest rates: gold pays no interest or dividend. When inflation-adjusted rates rise, the opportunity cost of holding gold rises; when they fall, that cost shrinks.
• The US dollar: because gold is priced in dollars, a stronger dollar makes it more expensive for non-dollar buyers.
• Central bank buying: purchases by central banks diversifying their reserves are a significant part of demand.
• Uncertainty and geopolitical tension: "safe haven" demand can rise in times of crisis.
• Inflation expectations: expectations that a currency will lose purchasing power can lift interest in gold.

These forces can pull in different directions at once, so none of them sets the direction of the price on its own.

Ways to hold gold exposure: physical, ETFs, futures and tokens

• Physical gold: bars, coins or jewellery, with storage and insurance costs.
• Gold ETFs: exchange-traded funds whose price is tied to gold.
• Futures: gold contracts that settle on a set date. They are opened with margin and involve leverage; losses can exceed the margin or the position can be closed by force.
• Gold-backed tokens: blockchain tokens tied to physical gold (below).

Gold-backed tokens: PAX Gold and Tether Gold

Gold-backed tokens are an example of the tokenization of real-world assets (RWA):

• PAX Gold: according to its issuer Paxos, each PAXG token represents one fine troy ounce of a London Good Delivery gold bar, held in custody by Paxos Trust Company.
• Tether Gold: according to its issuer TG Commodities, one full XAUt token represents one troy fine ounce of gold on a London Good Delivery bar.

A token is not the gold itself but a right against the issuer under set conditions. Its value depends on the issuer actually holding the gold, the reliability of the custodian and the redemption terms. Three questions stand out: in which vault and under whose custody is the gold held, how often are reserves independently reported, and on what terms can the token be redeemed for physical gold or cash?

Gold vs Bitcoin: a neutral comparison

Bitcoin is often called "digital gold", but the two assets differ:

Their prices sometimes move together and sometimes apart; there is no fixed relationship between them.

Gold, silver and platinum

Silver and platinum are precious metals too, but industrial demand plays a bigger role for them than for gold. Their prices are therefore more sensitive to the economic cycle and generally more volatile. The LBMA Good Delivery silver bar weighs approximately 1,000 troy ounces.

Live examples: gold price and technical analysis pages

• Gold (XAU) price per ounce shows the current ounce price.
• Gold (XAU) technical analysis gives trend and level readings.
• The stocks and commodities technical summary lists gold alongside other commodities and stocks.
• For other commodities, stocks and ETFs, see US stocks, ETFs and commodities: prices.

Developments linking gold and crypto markets are collected under TradFi news.

Risk note

The gold price fluctuates, and past performance is not a guide to the future. Gold derivatives and tokens add risks such as leverage, counterparty and custody.