A Forex Trader's Perspective on Aussie & Gold Relations

Intermarket strategies like the Australian dollar and gold offer numerous profit-gaining opportunities for the clued-up investors and forex traders. This becomes possible due to the close relations between different financial markets, namely between forex market and commodity market. And since Australia is the major producer of gold in the world, the correlation between gold and Australian dollar, or the Aussie, as it is called in forex jargon, is an opportunity that not only exists, but is the one that every forex trader can capitalize on.

The essence of it is that when the gold prices are rising, the Aussie strengthens respectively. And vice versa, if the gold prices are in decline, the Australian dollar loses value too. In this case a sound strategy will be to buy the Aussie when it is strong and to sell it when it is weak, basing on the gold prices.

Australian dollar holds high positions in terms of forex trading thanks to the fact that it is a commodity currency. Its value is linked to the export of gold that is characteristic of Australia - this country keeps on being the largest exporter of this commodity in the world. This currency's daily range in the forex market is 30-40 pips on average - the same as the major currencies' - only in case a deleveraging effect doesn't occur. If it takes place, high volatility is observed in the currency pairs including the Aussie.

However, it is important to keep in mind that forex traders won't face the strong correlations between the Aussie and gold while trading on a daily basis - these correlations become obvious on the longer time frames. This results in a fact that it's better to reduce the strike of the daily volatility and risk on a longer time scope.

The cues that can guide forex traders in catching the trading opportunities as far as observing Aussie/gold relations are Commodity Reserve Reports, COT Futures Reports, Australian economic developments and interest rates. These trades consequently are likely to take much more time than simple day-trading as the portfolio is striving to seize the overall market mood and attitude rather than intraday opportunities.

On the whole, if a forex trader seeks to trade currency pairs including the Aussie, he/she should watch the gold price movements closely and to set up his/her trading strategy depending on these movements. The Aussie itself provides great money-making opportunities worth trying. In general, forex traders take wonderful advantage of capitalizing on this commodity currency.