Lesson 1: How Institutions See the Gold Market

Lesson 1 of 10 · about 8 minutes · course overview

Institutions do not trade "XAUUSD". They trade gold through four connected markets, and the price you see on a retail chart is the meeting point of all four. Knowing which market is speaking, and when, is the first skill of a professional gold trader.

The four markets

1. London OTC spot and forwards. Banks trade "loco London" gold bilaterally, settled through the London clearing system, in 400-ounce bars. This is the largest market by value and the reference for spot XAUUSD. It has no central exchange and no public volume.
2. COMEX futures (New York). Standardised 100-ounce contracts (GC) and 10-ounce micros (MGC) on an exchange, with public prices, volume, open interest and weekly positioning (the COT report). Futures lead price discovery during US hours.
3. Exchange-traded funds. Physically backed ETFs hold metal in vaults; when investors buy shares, the trust buys gold. Their holdings are published daily.
4. Central banks and the physical market. Official buyers, jewellery and bar demand (India, China) and mine supply move slowly but set the long-run backdrop.

How they connect

Arbitrage ties them together. If COMEX futures trade too far above London spot, banks sell futures and buy spot, then deliver metal into New York. That is why spot and futures move almost tick for tick, separated by the basis: the cost of carrying gold until the future's delivery date. Your broker's XAUUSD quote is derived from the London spot market, which is why it can differ by a few dollars from a futures chart.

What this means for you

• Use futures data (volume, open interest, COT, curve) as the public window into institutional activity; spot has none.
• Expect the biggest flows when London and New York overlap and around US data, when both markets are fully open.
• Read slow-moving flows (ETFs, central banks) for the trend backdrop, and futures positioning and volatility for the shorter term.

The rest of this track takes each window in turn, always with the live tool next to it.