Resolved Question
How are gold and other commodities related to Forex?
What's the effect of strong gold to weak dollar, and vice versa? Are they really related to each other?
over 2 years ago
Best Answer - Chosen by Voters
It's not directly related. But Gold is always connected to overall economy. (macroeconomic)
if inflation is occurring, usually praises of Gold raises.
(in other words if the currency loses it's value, Gold never do)
if deflation is occurring, usually praises of Gold drops
(in other words if the currency gain value, Gold stays stable)
over 2 years ago
Answers (2)
Although not perfect, gold and other commodities do have some sort of correlation with currencies.
The best example of this would probably be GOLD and the Aussie/Dollar. Notice both Gold and AUD/USD is rallying to new yearly highs. The reason behind this is more than half of Australia's exports is gold! Another example is the inverse correlation of the USD/CAD and Oil prices. When oil prices rise, the USD/CAD pair falls. When oil prices fall, the USD/CAD pair rises. You can learn more about the issue in the link I provided above.
If you'd like to know more about Intermarket Analysis, I recommend checking this book by Ashraf Laïdi.
over 2 years ago
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Yea, All commodities and currencies are relate to each other in some or the other way. Forex speaking, how can a country survive without inflation? The answer is they cannot, and my speculation is that when the next crisis hits – and be warned we are approaching the time when it will – when the economies do double dip in the recession bowl – the US will revert to deflating the debt even though they had promised not to.
The level of spending going on in the US is unsustainable and will only serve to hurt everything in that touches it. The Chinese have reasons to be moaning and the Russians might get their wish of a new world reserve currency to replace the Dollar (they are the only ones who used the word “replace” – everyone else jut says “alternative”) but this will not be good for the world or for the Forex market. The US economic advisory team needs to start cutting back on not only their current expense, but their planned ones as well – the world is getting nervous and when news like 7 Trillion in debt in one year gets the attention it so deeply deserves, make sure you are not holding onto greenbacks.
over 2 years ago
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