Gold, often termed a “safe-haven” asset, has a unique relationship with certain currency pairs. Understanding “Which Currency Pair Correlates with Gold” correlations can provide valuable insights for investors and traders.
Australian Dollar (AUD) and Gold
Australia stands as the world’s third-largest gold producer. This close association results in a strong positive correlation between the Australian dollar (AUD) and gold prices. Historically, this correlation has been around 80%. When gold prices rise, the AUD tends to appreciate, and vice versa.
Trading Insight: If you anticipate an increase in gold prices, considering a long position on AUD/USD might be beneficial. Conversely, if you expect gold prices to decline, a short position could be considered.
New Zealand Dollar (NZD) and Gold
New Zealand’s economy shares similarities with Australia’s, especially concerning gold production. The New Zealand dollar (NZD) often mirrors the AUD’s movements, leading to a high positive correlation with gold prices. This correlation has been approximately 88% in recent years.
Trading Insight: Anticipating gold price movements can guide decisions on NZD/USD positions, similar to strategies used with AUD/USD.
Swiss Franc (CHF) and Gold
Switzerland’s historical practice of backing its currency with gold reserves has fostered a negative correlation between the Swiss franc (CHF) and gold prices. As gold prices rise, the CHF tends to depreciate, and vice versa.
Trading Insight: If gold prices are expected to increase, considering a short position on USD/CHF might align with this outlook. Conversely, if gold prices are anticipated to fall, a long position could be appropriate.
Canadian Dollar (CAD) and Gold
Canada’s significant gold exports contribute to a positive correlation between the Canadian dollar (CAD) and gold prices. However, this relationship is not as pronounced as with AUD or NZD.
Trading Insight: While CAD/USD may react to gold price movements, it’s essential to consider other factors, such as oil prices, which also influence CAD due to Canada’s oil exports.
Conclusion
The strength of correlation between gold and various currency pairs varies. AUD/USD and NZD/USD exhibit the strongest positive correlations with gold, making them more responsive to gold price movements. USD/CHF shows a notable negative correlation, while CAD/USD’s correlation is moderate and influenced by additional commodities like oil.
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