Before we detail the relationship between the com-dolls and gold, let’s first note that the U.S. dollar and gold don’t quite mesh very well.
Usually, when the dollar moves up, the gold falls and vice-versa.
The traditional logic here is that during times of economic unrest, investors tend to dump the greenback in favor of gold.
Unlike other assets, gold maintains its intrinsic value or rather, it’s natural shine!
Nowadays, the inverse relationship between the Greenback and gold still remains although the dynamics behind it have somewhat changed.
Because of the dollar’s safe haven appeal, whenever there is economic trouble in the U.S. or across the globe, investors more often than not run back to the Greenback.
The reverse happens when there are signs of growth.
Take a look at this awesome chart:
Currently, Australia is the third biggest gold-digger… we mean, gold producer in the world, sailing out about $5 billion worth of the yellow treasure every year!
Historically, AUD/USD has had a whopping 80% correlation to the price of gold!
Not convinced? Here’s another one:
Across the seven seas, Switzerland’s currency, the Swiss franc, also has a strong link with gold. Using the dollar as base currency, the USD/CHF usually climbs when the price of gold slides.
Conversely, the pair dips when the price of gold goes up. Unlike the Australian dollar, the reason why the Swiss franc moves along with gold is because more than 25% of Switzerland’s money is backed by gold reserves.
Isn’t that awesome?
The relationship between gold and major currencies is just ONE of the many that we will tackle. Keep reading!