What is VWAP (Volume-Weighted Average Price)?
The average price traded over a period, weighted by volume at each price: Σ(price × volume) ÷ Σ(volume). For gold, its value depends on when the session starts (Globex or day session).
In context
VWAP was not invented for retail chart reading. It became popular as a benchmark for execution quality, that is, how well (how cheaply or expensively) a large order was filled. A well-known 1988 paper by Berkowitz, Logue and Noser in the Journal of Finance, "The Total Cost of Transactions on the NYSE", used the day's VWAP as the reference against which institutional trades were measured. The logic is simple. If a pension fund buys a large block of shares throughout the day and its average purchase price is below that day's VWAP, it bought more cheaply than the average participant, and its trading desk is judged to have executed well. If it paid above VWAP, it did worse than average.