Many traders look at gold only as a commodity, but in the Forex market, gold often behaves more like a currency. When confidence in fiat currencies weakens, gold tends to attract demand. When confidence returns, gold usually gives back gains. This is why gold can be a useful signal for Forex traders.
Gold is priced in US Dollars, so its movement is closely tied to USD strength or weakness. When the Dollar is broadly sold, gold often rises. When the Dollar strengthens, gold usually faces pressure. This makes XAU/USD a valuable tool for understanding overall Dollar sentiment.
For Forex traders, gold can act as a confirmation signal. If EUR/USD is rising and gold is also moving higher, it often suggests broad Dollar weakness. But if currencies move without support from gold, the move may lack conviction.
In this way, gold becomes more than a trade on its own. It becomes a lens through which traders can read the currency market.
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