Every one of us loves gold - how can one not love it? It's shiny, metal, and makes pretty cool jewelry. In addition to that, gold is used in many, many applications like highly conductive wiring, reflective coating, and dentistry -
In the world of finance, gold is attentively viewed as having a safe against inflation and it is one of the most highly traded commodities. So how does all of this knotted into the Forex trading? Excellent question! And to answer that, we'll take a look at the Australian Dollar.
For many traders, trading the Australian Dollar is exactly like trading gold. Australia is one of the world's largest producers of gold and it exports composes over 50% of commodities, including precious metals.
These commodities counts as a large portion of Australia's Gross Domestic Product; a lot of traders watch the rise and fall of commodity prices, especially gold, which have the power of producing an effect in the direction of the Australian Dollar. Let's have a peek at a comparison chart of gold and the "Aussie:"
That was a monthly chart compares between the price movement of AUD/USD and gold all the way back to January 1980. As you can see, the two's movements were almost entirely the same, and from January 1980 to about January 2002 you can see gold as a leading indicator to AUD/USD.
The "yellow stars" above shows the major turning points in gold. These major turning points occur before the major turning points in AUD/USD. This relation changed around 2002 as gold and AUD/USD movements were almost the same until gold rose up in value in 2005 to 2006.
As we have seen with oil and USD/CAD, traders can watch gold prices to get an extra edge in their analysis of AUD/USD as gold movements can have an indicated potential clues to where AUD/USD is headed to. For those who can’t trade gold directly, AUD/USD’s strong relation existing between them and gold makes a great substitution. You can trade AUD/USD in the spot Forex market as a power for gold, which is traded in the futures market.
No comments:
Post a Comment