Gold Market History
Gold And Oil Prices Are Leading Indicators Of Currencies!
Gold,oil and forex markets are intimately connected. As a forex trader, keeping an eye on the gold and oil markets can help you forecast price changes. Gold and oil prices are considered to be leading indicators in forex trading. The three markets, gold, oil and forex tend to move based on the same fundamentals.
There are four currencies that are intimately correlated with gold and oil prices. These currencies are the Australian Dollar (AUD), the Swiss Franc (CHF), Canadian Dollar (CAD) and the New Zealand Dollar (NZD). These four currencies are popularly known as Commodity Currencies. The correlation between gold and AUD, CHF and NZD is strong. However, the correlation between CAD and oil prices is not that strong but can still serve as a leading indicator.
Gold and US Dollar (USD) are negatively correlated. When USD depreciates or becomes weak, gold prices tend to go up. Especially in times of political and financial crisis, investors tend to flee the USD and take refuge in gold. Gold is still considered as the ultimate safe haven by investors. This has something to do with the perceptions for gold that have been fashioned over thousands of years of human history. So the currency pairs USDCHF, AUDUSD and NZDUSD tend to mirror the movements in the gold market. One of the popular currency pairs that is traded by forex traders is the pair USDCHF. So if you are trading this currency pair, you should always keep an eye on the gold market.
CAD is the only commodity currency that is correlated with oil and not gold. This has to do with the Canadian economy that is heavily dependent on heating oil during the long winter season. Canada is also a major exporter of oil to US. When oil prices rise, oil demand in US falls reducing the demand for CAD. This negative correlation between oil and CAD is however not very strong.
Globalization has changed the nature of the global financial system. Now, most of the markets are interlinked. Commodities, stocks, futures, forex all these markets have now correlations that can be used by savvy traders in forecasting. Gold prices are reaching historical highs. Australia is a big exporter of gold as large gold mines are located in its interior. So when gold prices go high, AUD also tends to appreciate. On the other hand, when gold prices increases USD gets weak (gold and USD are negatively correlated). So this produces a double impact on the pair AUDUSD. What this means is that this is the best time to trade AUDUSD!
About the Author
Mr. Ahmad Hassam is a Harvard Gradaute. Discover the High Velocity Market Master HVMM System that can day trade or swing trading stocks, forex, futures, gold, commodities, ETFs,bonds and get your FREE copy of the Ultimate Day Trading System just now. Get these FREE Forex Scalping Cheatsheets!
What is the correct time to invest in to Gold?
Looking to the present volatile market, I now want to invest in a gold bar or coin. Any tips? (like i studied the history of gold price, which shows that always between aug. sept. the prices get down)
Hi purvi
You are very much right. right now the prices are at its lower level.
u can invest in gold by ETF GOLD . its like shares on stock exchange and the price of these shares run on the price of gold. if gold goes high the this stock goes high and if gold goes down then stock also goes down.like todays price is around 1137 for 1 share. one share is like 1 Gram. the price will go high in feb or march
Buy silver, stock market collapse, sheeple, gold and silver history PART 1 OF 2
