Gold affects USD/CHF and AUD/USD in opposite ways.
When Gold prices go up, the USD/CHF falls down. When gold prices go up, AUD/USD will trend upwards. Gold is inversely/negatively related to USD and positively related to CHF and AUD
Gold is one of the most traded commodities in the world due to its good intrinsic value and because is less affected by uncertain conditions.
Gold prices rise when other economies are doing bad and fall when there is a boom in the economy.
It’s price fluctuations majorly affect the 3 major currencies. i.e, USD, AUD and CHF.
Gold, AUD and CHF have a strong positive relation. But never agree when related with USD.
Let’s now discuss how Gold affects USD/CHF and AUD/USD
How Gold affects AUD/USD
When gold prices go up, AUD/USD will trend upwards.
Gold and AUD/USD have a positive correlation.
They move together almost all the time
Gold Prices and the U.S. economy
A rise in the dollar usually leads to fall in gold. The opposite is also true.
Gold prices truly show the true state of U.S. economic health.
When the U.S. economy is doing well, the prices of Gold will fall.
Conversely, when the U.S. economy is bad, the gold prices will hike.
During the economic crisis in the US,
Investors buy gold as protection from either an economic crisis or inflation.
Remember Gold’s inner value does not change whether there is a crisis or not.
Moreover, gold is priced in the dollar. This means every transaction of gold, you spend/receive a dollar.
As more of the dollar is spent to buy gold, it’s supply into the economy increases and hence fall in the value of the U.S dollar.
Increase in demand for gold leads to increase in its prices.
On contrary, during economic boom in the U.S. economy, gold prices fall.
Similarly,
To invest in gold or buy gold you have to first exchange your currency into US dollars.
When the price/value of the dollar increases, economic boom in the US economy, it becomes expensive to buy gold.
This leads to a fall in demand for gold which may further leads to a fall in gold prices per ounce.
Therefore gold and the USD have an inverse/negative correlation. A fall in price of the one leads to rise in prices of the other and vice-versa.
Gold Prices and the Australia’s Economy
Gold and AUD have a positive relationship and are both inversely related to USD.
Australia is one of the major exporters of Gold in the world contributing about 80% of Gold to the market.
Its economy is highly boosted by gold.
If prices of gold rise, the Australian exports will rise leading to expansion of the Australian economy and foreign investment.
More of the Australian dollar will be demanded and the AUD will appreciate.
Increase in demand for gold leads to increase in demand for AUD and a growth in the Australia’s economy.
Gold Vs AUD/USD
When gold prices go up, AUD/USD will trend upwards due to the increase in demand for AUD.
However, when the gold prices fall, the AUD/USD will trend down.
However this may not hold all the time especially in times of economical crisis or uncertainties.
During this period investors prefer to invest in gold than AUD because it is a safe haven.
Similarly, during this time, traders and investors choose USD rather than AUD, because USD is a more strong and stable currency and a safe haven.
Effect on the USD/CHF
When the gold prices go up, the USD/CHF fall down and vice versa.
Gold is inversely/negatively related to USD and positively related to CHF
Gold Prices and the Switzerland Economy
The Switzerland currency “CHF” has a positive correlation with gold.
This is so because more than 25% of its currency is backed up by gold reserves.
Switzerland is also among the highest gold exporting and importing countries on the global market.
Well, the country is truly the global hub for the gold industry.
Most of the gold in the world passes through Switzerland.
Swiss refineries process 70% of the unrefined gold mined in the whole world each year.
Also, the CHF and Gold are both inflation hedging (safe haven) in times of uncertainty.
CHF has the lowest interest rate among the major market currencies on the globe market and the most stable currency in the world.
During periods of uncertainty, traders and investors feel safe to keep their wealth in gold or CHF.
Therefore, as prices of gold increase, the CHF value also increases/appreciates and vice versa.
Gold is positively related to CHF and inversely related to USD/CHF.
When the gold prices go up the USD/CHF fall down. The opposite is true
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