Glossary
Gold
A precious metal traded as a commodity and held as a store of value and hedge, quoted in US dollars per troy ounce.
Gold is a precious metal that trades worldwide as a commodity and is held by central banks, funds and individuals as a store of value. Its price is quoted in US dollars per troy ounce, a unit of about 31.1 grams, and is often shown with the code XAU. Gold matters to investors less for its industrial uses than for its behavior: it pays no income, yet it often holds value when currencies, stocks or confidence in the financial system are under strain.
How its price is set
The spot price comes from a global over-the-counter market centered in London, alongside futures traded on COMEX in New York, where the standard contract covers 100 troy ounces. Common drivers include real (inflation-adjusted) interest rates, since gold offers no yield to compete with bonds; the strength of the dollar; central-bank buying; and demand for safety during crises.
Ways to hold it, and their trade-offs
- Physical bullion and coins: no counterparty, but storage, insurance and dealer markups.
- Gold ETFs that hold metal in vaults: easy to trade, with an expense ratio.
- Futures: leveraged, with rolling costs; regulated by the CFTC.
- Mining stocks: exposed to gold but also to costs, management and the stock market.
In the US, physical gold and many metal-backed trusts are taxed as collectibles, with long-term gains taxed at up to 28% rather than the usual capital-gains rates.