A lot of us at the moment are looking for the correlation of gold, oil and the currency markets such as the United States dollar. These days almost all foreign currencies are correlated with gold and oil prices.
Oil is the principal commodity which drives the global economy. Most of us have observed the net result of high oil prices and how that makes everything else way more costly because the cost of transport rises. This therefore influences the currency market.
There are however four foreign currencies that display a fairly strong correlation with gold and oil. These 4 are known to traders as the commodity currencies.
The Commodity Currencies
The 4 commodity currencies which are highly correlated with gold and oil include the Canadian Dollar (CAD), Australian Dollar (AUD), New Zealand Dollar (NZD) and also the essential Swiss Franc (CBF). A lot of people believe that the NZD is a hot favorites with carry traders but this is old information. The CAD is in particular correlated with oil however less so with gold. If you’re searching for the top 3 foreign currencies correlated with gold then you will want to look to the AUD, NZD, CBF.
You know that gold is the fall back position when the world financial markets are struggling. This had led to such high prices for gold in recent years. We certainly have continually had a fascination with gold going back to the Californian gold rush and beyond; because we still dig up gold treasures from ancient Egypt today.
This love of gold carries on with traders today; and in a time of political and economic crisis gold rules and seen as a safe home for investments.
The United States Dollar Is "Negatively Correlated" With Gold
This has led to men and women shifting away from the US Dollar (USD) as the "world’s currency"; people then moved towards the Euro however right now individuals see gold like a safe shelter until there are actually indicators of a recovery. At this particular moment in time the correlation of gold and the USD is what we call "negatively correlated". We now call gold the "Antidollar".
The markets have changed and we’ve now a global financial system with all the markets interconnected. It doesn’t matter what markets you trade on whether it be stocks, commodities, futures or forex all are correlated and are utilized by traders whenever forecasting. It’s resulted in gold right now hitting prices that people haven’t observed before. It has put Australia in an desirable position.
Australia is a enormous exporter of gold. The actual correlation of gold and the US and Australia Dollar is significant. This means if the gold price is high the AUD tends to appreciate. While doing so the us Dollar gets weaker. The net outcome is a double effect on AUDUSD. What this means is it has never been a much better time to buy and sell AUDUSD.
