What is XAUUSD? Spot gold, London gold and the spread, explained properly

You open a market screen and see XAUUSD sitting next to a four-figure price, 4,138.44 say. The number moves every day, but very few people can explain what it actually is, how much one lot is, or how the spread turns into money missing from your account. The result is people trading for six months without ever having calculated the true cost of a single trade.

This article takes it apart: where the name XAUUSD comes from, the contract specification, how to read a quote, how spread and overnight financing convert into dollars, how much leverage wipes you out, and when you can trade — then closes with the compliance red lines overseas Chinese must respect when opening an account and funding it. Every number is calculated from today's live quotes so you can follow along with a calculator.

1. Taking the name apart: what XAU + USD is really saying

XAUUSD is written in currency-pair format, the same logic as EURUSD: the thing comes first, the currency it is priced in second. XAU is the code gold was assigned under ISO 4217 (silver is XAG, platinum XPT, palladium XPD) and USD is the dollar. So XAUUSD = 4,138.44 means: one troy ounce of gold is currently worth 4,138.44 US dollars.

There is a unit here that gets overlooked: a troy ounce is not the avoirdupois ounce we use day to day. 1 troy ounce = 31.1035 g, about 10% heavier than the avoirdupois ounce (28.3495 g). Gold, silver and platinum all use troy weight, while the "mace" and "tael" you hear in a gold shop are a different market system entirely, and Hong Kong still keeps the "tola-style" tael (1 Hong Kong tael = 37.429 g). Inconsistent units are the easiest place to miscalculate when comparing prices across markets.

Convert the ounce into the grams you know: 4,138.44 ÷ 31.1035 = 133.05 USD per gram, then multiply by 6.6913 to get 890.30 CNY per gram. That 890 is the number you can hold directly against a gold shop's list price. Use the gram / ounce converter whenever you need it, and do not do it in your head.

2. Contract specification: how much is one lot

A notional value of 410,000 USD matters, because it sets the scale of every risk below. Many people think they have "only taken 0.1 lots" while actually running 40,000 USD of exposure — a 1% move is then 414 USD of P&L, and that is just an ordinary morning.

3. How to read a quote: bid, ask, spread and point value

The platform always gives you two prices: the bid is what it will buy back at, and you sell at that price; the ask is what it sells to you at, and you buy at that price. Today's quote is bid 4,138.11 / ask 4,138.77, a gap of 0.662 USD, which is the spread.

Spreads get expressed three ways; do not let them confuse you:

• Absolute difference: 0.662 USD/oz. The least ambiguous way to say it, and the one to use when comparing prices
• Percentage: 0.662 ÷ 4,138.44 = 0.0160%, the friction cost of a round trip
• Points (pips): if a platform treats 0.01 as one point, the spread is 66.2 points; if it treats 0.1 as one point, it is 6.62 points. Conventions differ, so establish what one point is before discussing points

In money: 1 lot of 100 oz × 0.662 = 66.2 USD per lot, about 443 CNY at 6.6913. That is what every round trip costs you, regardless of whether your direction was right.

It is also why introducing brokers always urge you to trade more: the rebate comes out of the spread you pay, so the more you trade the more they earn and the thinner your equity. There are only two ways to control cost — trade less often, and pay a lower spread.

4. Why XAUUSD quotes differ across platforms

The spot price of gold has a single origin (the London OTC market), yet the numbers you see on different platforms differ by 0.2 to 1.5 USD. Nobody is cheating you; it is structural:

1. Different liquidity providers: platforms take quotes from banks and non-bank market makers, then add their own markup. Different upstream means different downstream
2. Different markup models: some put cost in the spread (zero spread plus commission), others put it in the fill price, so a low visible spread does not mean a low total cost
3. Different update frequency: 4 times a second versus 40 times a second gives different prices in a fast market
4. Different server time: a UTC+2 or UTC+3 server cuts the daily candle 5 to 6 hours away from Beijing time, so the "daily high and low" you read may be wrong

The way to compare is crude but effective: same minute, same instrument, same lot size, screenshot the bid and ask on both platforms. Do not do it in the three minutes after a nonfarm payrolls release, when every platform widens its spread and you learn nothing about the real level.

5. Leverage, margin and liquidation: work out the worst case first

Still using 4,138.44. Leverage is about how much margin supports 100 oz of exposure; it does not change the size of your P&L, only how fast you get closed out:

Look at the last column: today's average hourly swing over those 8 hours was 12.49 USD, while at 1:500 a mere 8.28 USD against you wipes the account. An entirely ordinary afternoon is enough to clear a fully loaded 1:500 account. That is not an extreme market; that is the average.

More important still is the liquidation level. Most platforms liquidate when losses reach 50% of margin, so the move you can actually absorb is half the figures above: at 1:100 just 20.69 USD (0.5%). Today's 8-hour range was 37.10 USD, which means one full-size position can be carried out on a stretcher. Put the numbers into the margin calculator and the position size calculator; it is more useful than reading ten articles on "managing risk".

6. The truth about "gold trades 24 hours"

Gold does trade nearly around the clock, but not uniformly. In Beijing time (summer):

Two practical points. First, overnight financing accrues at 00:00 platform time, and many platforms charge triple on Wednesdays (to cover the weekend), so check the rate sheet before holding through a Wednesday. Second, weekend gaps are the hardest risk to defend against in leveraged trading: a stop order can only fill at the first available price after a gap, and during the March 2020 liquidity squeeze gold spreads briefly widened beyond 10 USD. Cutting size before the Friday close is the cheapest insurance available.

To see which market is open right now, use the live session table rather than relying on memory.

7. Overnight financing: the badly underestimated holding cost

XAUUSD is a margined contract, so holding overnight incurs (or earns) financing — in essence the cost of borrowing to own gold. In a high-rate environment a long position almost always pays:

• Assume 18 USD per lot per night on a long (the industry range is commonly 15–30)
• Held for a month, 30 nights = 540 USD, which is 13% of the 4,138 USD margin
• Held for 10 nights = 180 USD, 2.7 times the spread (66.2 USD)

The conclusion is clear: XAUUSD is not a vehicle for long-term holding. If you want three months or more, use physical bars, a gold ETF or a bank gold passbook, whose cost structures are entirely different — no overnight charge, just a one-off spread and a management fee. Put spread, commission and financing all into the P&L calculator and you find your true break-even; a lot of "small wins" never covered the cost in the first place.

8. How XAUUSD differs from other ways of buying gold

The key column is ownership. Buy a bar and a rising price means the bar is yours; trade XAUUSD and what you hold is a contract — if the platform runs into trouble you own neither metal nor security, only a claim. Which explains why, in contract trading, the first question is always "can I withdraw", not "how tight is the spread". For the channel comparison see gold ETF versus physical gold.

9. Opening an account as an overseas Chinese: documents, funding and red lines

1. What you need to open an account

Three things: a passport or local ID, proof of address within three months (bank statement, utility bill, government letter), and a bank account in your own name. The name must match in all three places — ID, account, and the remitter funding the deposit. Any mismatch will block the withdrawal, and by then the money is already on the platform.

2. Choosing a funding route

The most robust order is: wire from your own overseas bank account → your own bank card → a licensed local e-wallet. Crypto deposits are convenient, but many platforms impose extra restrictions on withdrawals from crypto deposits, so establish the "return the way it came" rule before transferring. Third-party payment and transfers through friends look easier but import the AML risk onto you.

3. Three red lines you cannot cross

• FX quota and permitted purpose: China's annual facilitated personal FX purchase quota is the equivalent of 50,000 USD, and it is explicitly not permitted for overseas property, securities investment or other capital-account uses that are not yet open. Using purchased FX for offshore leveraged gold trading is a false purpose declaration
• Split remittances ("ant moving"): breaking a large sum into several transfers and borrowing relatives' quotas, once judged as regulatory avoidance, puts you on a watch list, forfeits the facilitated quota for that year and the following two, and freezes the quota you already have
• Underground banks and "mirror" settlement: paying RMB domestically and receiving foreign currency abroad is a priority AML surveillance target, and when the account is frozen the money often cannot be recovered

AML is not an abstraction. Cross-border wires, large single cash amounts and frequent third-party transfers all trigger a bank's suspicious transaction report; one report does not necessarily mean a problem, but once flagged, every subsequent legitimate transfer gets checked repeatedly. For larger amounts, have income proof and tax documents ready in advance so you can explain the source when asked — far easier than explaining afterwards. The full compliant route is in remitting money to buy gold as an overseas Chinese: legal routes and red lines.

4. You report your own tax

The platform will not file for you, and should not. CFDs, futures and ETFs are treated completely differently across jurisdictions: the US treats physical gold as a "collectible" (long-term capital gains up to 28%); Hong Kong and Singapore do not tax capital gains; Australia and Canada require it in that year's income. Spending an hour before opening an account to check the rules where you live, or asking a licensed local accountant, matters far more than saving a fraction of a point on the spread.

10. Five common misconceptions

1. "XAUUSD can be converted into physical bars" — it cannot. It is a contract for difference, cash-settled, with no delivery stage. For metal, go to a bullion dealer
2. "Zero-spread platforms are cheaper" — cost does not disappear, it moves. Zero spread usually comes with 3–7 USD per lot per side in commission, or the markup is buried in the fill price
3. "Higher leverage makes money faster" — at 1:500 an 8.28 USD move wipes you out, while today's average hourly move is 12.49 USD. Leverage multiplies speed, not win rate
4. "The platform's quote is the international gold price" — the platform price is its upstream quote plus markup, normally 0.2–1.5 USD apart. To compare, compare bid and ask in the same minute
5. "Nonfarm payrolls night is the most profitable time to trade gold" — spreads widen 3–8× at the release and slippage goes both ways. High volatility is not the same as tradeable, and many people hand back a month of profit on nights like that

11. From zero to your first trade: four steps

1. Two weeks on demo: learn order entry, stops and the liquidation rules, especially how liquidation is triggered
2. Small live account: 200–500 USD, trading 0.01 lots, with the aim of verifying the spread and fills rather than making money
3. Run a full withdrawal: request the entire balance and record the review days, the arrival days and the fees deducted. That step is more credible than any advertisement
4. Fix your position size: lock risk per trade inside 1% of capital, and calculate lots with a tool rather than by feel

The order cannot be reversed. The great majority of losses do not come from reading direction wrong, but from putting serious money in before the first three steps were finished.

The link above shows the live XAUUSD quote, intraday chart and technical indicators; prices are provided by Swissquote and are for reference only.

12. Frequently asked questions

Further reading and tools

• XAUUSD in depth: 100 oz per lot, point value, margin and liquidation price, item by item
• USD gold price vs CNY gold price: conversion formula and premium
• How to choose a gold trading platform: a 12-point checklist
• Gold trading costs: spread, commission and overnight financing, fully broken down
• Gold investing 101: from zero to your first trade
• Gram / ounce / kilogram converter
• Gold P&L calculator
• Margin / liquidation calculator
• Position size calculator
• Live trading session table
• Back to the academy home page

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