However, you need to understand that there is not necessarily a great relationship between the U.S. dollar and gold. The two typically move in opposite directions of one another. The traditional outlook is that when there is economic unrest, investors will dump the U.S. dollar in favor of gold. It has been seen as a safer investment in years gone by.

However, there is a strong correlation between (1) Aussie dollar pairs and gold, and (2) Swiss Franc pairs and gold.

Gold and the Aussie Dollar

The relationship between gold and the U.S. Dollar still exists, but the dynamics of that relationship have changed to some extent. The dollar has a safe-haven appeal to it these days, and that means that the dollar is likely to increase in value even during economically unstable moments. During times of economic growth, the opposite tends to happen.

The opposite is true for the Aussie dollar, which has a strong positive correlation with the gold market. Take a look at this chart (AUSUSD in blue and Gold in orange):

Australia is currently the third-largest gold producer in the world. Therefore, gold has a positive correlation with AUDUSD. When gold increases in value, AUDUSD tends to increase as well. When gold goes down, so does AUDUSD, generally.

Gold and the Swiss Franc

The Swiss Franc is also positively correlated with gold. That means that since CHF is the quote currency in the USDCHF pair, typically, the USDCHF tends to fall when gold rises and vice versa. Thus, USDCHF is negatively correlated with gold prices. Why? More than 25% of Switzerland’s money is backed up by gold. This means that Switzerland needs to import much more gold than many other countries do. They don’t produce it as Australia does, but their economy is propped up on gold.

Take a look at this chart (USDCHF in blue and Gold in orange):

Traders can observe what they see in the currency markets to make moves in the commodities markets and vice-versa.

 

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