Gold (XAU/USD): how it differs from currencies
By the end you will be able to work out the value of one pip on gold for a given lot size, and compare the rupee risk of a stop on gold with the same stop on a currency pair.
Contract size on gold compared with a currency pair
A currency pair such as USD/INR is quoted to four decimal places. One pip is 0.0001 of the quote. A standard lot is 100,000 units of the base currency. So one pip on USD/INR is worth about ₹10 per standard lot when the rate is near 83.2500. Gold is quoted in dollars per ounce. One lot is 100 ounces, not 100,000 units. The unit of the contract is ounces, not currency.
That difference changes every calculation. On USD/INR, a move of 0.0001 changes the value by a fixed small amount per lot. On gold, a move of USD 1.00 per ounce changes the value by 100 times the lot size in dollars. At 0.10 lots, that is 10 ounces. A USD 1.00 move is USD 10. To convert to rupees, multiply by the USD/INR rate. At 83.2500, USD 10 is ₹832.50. The same one-dollar move on a currency pair would be thousands of pips.
The contract size is not a suggestion. It is the multiplier that turns a price move into money. If you trade 0.01 lots of gold, you hold 1 ounce. A USD 1.00 move is USD 1, or about ₹83.25. If you trade 1.00 lot, you hold 100 ounces. The same move is USD 100, or about ₹8,325. The price on the chart does not change. Only the lot size changes the rupee risk. That is why the first step in any gold trade is to write down the ounces you actually control.
Pip value in rupees on gold at different lot sizes
On USD/INR, pip value is simple. One pip is 0.0001. At a standard lot, that is 100,000 times 0.0001, which is 10 units of the quote currency. At 83.2500, that is ₹10. On gold, there is no fixed pip in the fourth decimal place. The natural unit is one dollar per ounce. Its value depends on the ounces you hold. At 0.10 lots, one dollar per ounce is 10 ounces times USD 1, which is USD 10. In rupees at 83.2500, that is ₹832.50.
If you hold 0.01 lots, one dollar per ounce is 1 ounce times USD 1, which is USD 1. In rupees, that is ₹83.25. If you hold 1.00 lot, one dollar per ounce is 100 ounces times USD 1, which is USD 100. In rupees, that is ₹8,325. The pattern is linear. Double the lot size and you double the rupee value of a one-dollar move. Halve the lot size and you halve it. There is no separate pip table to memorise. You only need the ounces and the USD/INR rate.
The broker's contract size can vary. Some brokers quote gold in lots of 100 ounces. Others use different sizes. The minimum lot also varies. The spread, commission and conversion rate vary between brokers and can change. So the rupee figure you calculate is your own estimate, not a quote. Check the contract specifications on your platform before you trade. The number you see there is the one that applies to your account.
Wider ranges and the effect on stop distance
Gold often moves in wider daily ranges than USD/INR. A currency pair may move 30 to 60 pips in a quiet session. Gold may move several dollars per ounce in the same time. That does not mean gold is better or worse. It means the same stop distance in price terms carries more rupee risk. A stop of USD 5.00 per ounce on 0.10 lots is USD 50, or ₹4,162.50 at 83.2500. A stop of 20 pips on USD/INR at 0.10 lots is about ₹20. The rupee difference is large because the contract is larger and the price unit is different.
If you set a stop too close on gold, normal market noise can trigger it. If you set a stop too far, the rupee loss may exceed the risk you planned. The solution is not to guess. Decide the rupee amount you are willing to lose on the trade. Then work backwards to find the stop distance that fits. For example, if your risk is ₹2,000 and you trade 0.10 lots, then ₹2,000 divided by 83.2500 is about USD 24.02. At 10 ounces, that is a gold move of about USD 2.40 per ounce. If the chart needs a wider stop than USD 2.40, reduce the lot size instead of widening the stop.
This is the opposite of the currency habit. On USD/INR, a 20 pip stop is a small rupee amount at 0.10 lots. On gold, a 20 dollar stop is a large rupee amount at the same lot size. The arithmetic does not carry over. Always convert the stop to rupees using the ounces you hold and the current USD/INR rate. If the number is too high, lower the lot size. Do not move the stop closer just to make the number look smaller. That only increases the chance of being stopped out by normal movement.
Pip value and stop risk on 0.10 lots
| Step | Amount | Note |
|---|---|---|
| Gold contract size | 100 ounces | the standard size for one lot of XAU/USD at most brokers; some brokers offer smaller lots |
| Gold price used | USD 2,300.00 per ounce | an assumed price for the arithmetic only |
| One lot of gold, notional | USD 230,000 | 100 ounces x USD 2,300.00 |
| Lot size traded | 0.10 | one tenth of a standard lot |
| Notional traded | USD 23,000 | USD 230,000 x 0.10 |
| Gold move of USD 1.00 per ounce | USD 10 | 100 ounces x USD 1.00 x 0.10 lots |
| Stop of USD 10.00 per ounce | USD 100 | USD 10 x 10 dollars of movement |
| Same USD 100 in rupees | ₹8,325 | USD 100 x 83.2500, the USD/INR rate used in this course |
| USD/INR, one standard lot | ₹10 per pip | 100,000 x 0.0001, as covered in the earlier lesson |
| USD/INR stop of 20 pips, one standard lot | ₹200 | 20 x ₹10 |
| USD/INR stop of 20 pips, 0.10 lots | ₹20 | ₹200 x 0.10 |
The pip value above is a calculation, not a quote. The broker's own contract size, minimum lot, spread, commission and conversion rate all vary between brokers and can change the final rupee figure. The USD/INR rate also moves, so the rupee value of a dollar loss is only fixed at the moment of conversion.
Doing it once, step by step
These steps show you how to work out the rupee risk of a gold trade before you place it. Follow them in order each time you consider a trade on XAU/USD.
- 01
Write down the ounces you control
Find the contract size for gold on your platform. It is often 100 ounces per standard lot, but it varies between brokers. Multiply the contract size by the lot size you plan to use. For 0.10 lots and 100 ounces per lot, you control 10 ounces. Write that number down.
- 02
Measure the stop distance in dollars per ounce
Look at the chart and decide where the stop belongs based on price structure, not on the money. Find the difference between your entry price and the stop price in dollars per ounce. For example, if you enter at USD 2,300.00 and the stop is at USD 2,295.00, the distance is USD 5.00 per ounce. Write that down.
- 03
Convert the stop to dollars
Multiply the stop distance by the ounces you control. With 10 ounces and a USD 5.00 stop, that is 10 times 5, which is USD 50. This is the loss in dollars if the stop is hit. It does not yet include spread, commission or slippage.
- 04
Convert the dollar loss to rupees
Multiply the dollar loss by the current USD/INR rate. At 83.2500, USD 50 times 83.2500 is ₹4,162.50. Check the rate on your platform, because it moves. The rupee figure is only exact at the moment of conversion.
- 05
Compare the rupee risk with your limit
Compare the result with the maximum rupee loss you set for this trade. If the calculated loss is larger, reduce the lot size. Do not move the stop closer to make the number smaller. Recalculate with the smaller lot size until the rupee risk fits your limit.
- 06
Check the broker's specifications before trading
Confirm the contract size, minimum lot, spread, commission and conversion rate on your platform. These vary between brokers and can change. The rupee figure you calculated is an estimate based on the numbers you used. The actual result may differ.
The mistake most people make here
The common mistake is to carry over the currency habit of counting pips in the fourth decimal place and to assume a small lot keeps the risk small. On gold, a one dollar move in the price is a large move in money, because the contract is 100 ounces. A stop that looks like a few pips on a currency chart can be several times larger in rupees on gold at the same lot size. Before placing the order, work out the stop in rupees using the contract size you actually have, and check whether that number fits the risk you set for the trade. If it does not, reduce the lot size rather than the stop distance.Check yourself
Gold is at USD 2,300.00 per ounce. You trade 0.10 lots and your stop is USD 5.00 per ounce away. What is the loss in rupees at USD/INR 83.2500?
0.10 lots is 10 ounces. A USD 5.00 move is 10 x 5 = USD 50. In rupees, USD 50 x 83.2500 = ₹4,162.50.
On USD/INR at 0.10 lots, a 20 pip stop costs ₹20. If the same ₹20 were your whole risk on gold at 0.10 lots, how many dollars of gold movement would that allow?
₹20 divided by 83.2500 is about USD 0.24. At 10 ounces that is a gold move of about USD 0.024 per ounce, which is far smaller than a normal gold range. The point is that the same rupee risk buys much less room on gold.
Why is one pip not a useful unit for gold in the way it is for USD/INR?
A pip on USD/INR is a fixed 0.0001 of the quote, worth ₹10 per standard lot. Gold is quoted in dollars per ounce, so a one dollar move is the natural unit, and its value depends on the contract size, here 100 ounces per lot.
Questions that come up next
Why does gold move in dollars rather than pips?
Currency pairs quote to four decimal places, so a pip is a fixed small step. Gold quotes in dollars per ounce, so the natural unit is one dollar. Its rupee value depends on the ounces you hold. There is no fixed pip in the fourth decimal place.
How do I work out my risk in rupees on a gold trade?
Write down the ounces you control, which is the lot size times 100. Multiply by the stop distance in dollars per ounce. That gives the loss in dollars. Multiply by the USD/INR rate to get rupees.
Can I use the same stop distance on gold as on USD/INR?
No. A gold stop of a few dollars per ounce can be several times larger in rupees than a currency stop at the same lot size. The contract size of 100 ounces makes each dollar move worth more. Always convert the stop to rupees before placing the order.
What should I do if the rupee risk is too large?
Reduce the lot size rather than the stop distance. A tighter stop may be hit by normal market movement. A smaller lot keeps the same stop but lowers the money at risk.
Does the broker's contract size change the calculation?
Yes. The contract size, minimum lot, spread, commission and conversion rate vary between brokers. Some quote gold in lots of 100 ounces, others use different sizes. Check your broker's specification before you calculate.
Why does the rupee value of my loss change after I close the trade?
The USD/INR rate moves. The rupee value of a dollar loss is only fixed at the moment of conversion. If the rate changes between opening and closing, the final rupee figure will differ.
In India
- Regulator
- SEBI regulates securities markets in India; the rules that apply to a specific product can differ, so check the current position before trading.
- Money
- The rupee, written ₹ (INR).
- Payment methods
- UPI and bank transfer are commonly used to move money to and from trading accounts.
- Reference rate used here
- USD/INR around 83.2500; this rate moves and is not fixed.
- Pip value on USD/INR
- One pip on one standard lot is ₹10 (100,000 x 0.0001).
The words used on this page
- Contract size
- The amount of the underlying asset in one lot. For gold, one lot is often 100 ounces. For USD/INR, one standard lot is 100,000 units.
- Pip
- A fixed small step in a currency quote, usually 0.0001. It is not used for gold in the same way. Gold moves are measured in dollars per ounce.
- Lot
- A standardised quantity for a trade. On gold, 0.10 lots is 10 ounces if one lot is 100 ounces. The lot size sets how much money each price move is worth.
- Stop distance
- The gap between your entry price and your stop order, measured in price units. On gold, this is in dollars per ounce. On USD/INR, it is in pips.
- USD/INR
- The exchange rate between the US dollar and the Indian rupee. It is used to convert a dollar loss or profit into rupees.
- XAU/USD
- The price of one troy ounce of gold in US dollars. It is quoted in dollars per ounce, not in pips.
What to take away
- Gold is quoted in dollars per ounce, so a one dollar move is the natural unit, not a pip.
- The contract size is the multiplier: 0.10 lots is 10 ounces, so a USD 1.00 move is USD 10.
- Convert the dollar risk to rupees at the USD/INR rate to see the money at stake.
- If the rupee risk is too high, reduce the lot size rather than the stop distance.