Gold is a precious metal that is quite in demand by futures traders. With a relatively stable price, throughout the history of gold trading has managed to prove itself as one of the preferred commodities that should be a favorite of traders in Indonesian futures investment.
As we know, there are two common ways of analysis; Fundamental and technical. Forget the numbers and confusing charts because this time we will discuss fundamental analysis in predicting the price action of gold commodities. Especially in relation to currency movements.
Generally, there are four currencies whose fundamental economic conditions are quite influential on the price movements of this precious metal commodity. The four currencies are; United States dollar (USD), Swiss Franc (CHF), Australian dollar (AUD), and Canadian dollar (CAD).
Uncle Sam’s currency is known as the “anti-gold” currency. Historically, the USD has almost perfectly reflected an inverse relationship with this currency. When the price of gold goes up, the USD will go down. While when the price of gold falls, the USD tends to strengthen.
This happens because the price of gold is usually measured by USD. So the weakening of the USD due to global uncertainty will be the main cause for the rise in gold prices, which occurs due to the nature of gold which is considered a form of strong substitution of money. Gold is also believed to be a security commodity for many people. In unstable economic and political conditions, traders will tend to collect more gold, which causes the USD exchange rate to weaken.
As for CHF, chf price movements are very strong related to gold because Switzerland is known as a country that pretty much stores gold reserves. Swiss regulations used to require gold reserves of up to 40% to support the country’s currency. Although the rules have been changed, a strong relationship between CHF and gold is embedded in traders’ mind. So if the price of gold rises, then the CHF exchange rate will also be eroded.
In addition to CHF, the aud kangaroo country currency is also included that tends to move in the direction of gold prices. With statistics up to 80%. Australia’s status is one of the largest gold producing countries in the world and the contribution of gold to the country’s export value is quite dominant is the main cause. As a result, if this commodity rises, then the AUD will also rise, and vice versa. Therefore, if gold prices start to strengthen, the Australian central bank starts to raise its benchmark interest rate to hold the rate of inflation. This shows the price of gold is quite sensitive to the economy of kangaroo country.
The last is Canada with its CAD currency. Canada is one of the countries with the largest GDP value in the world. The country has grown consistently since 1991. The exploitation and export of natural resources, such as gold and oil, is one of Canada’s main focus.
From the movement of the three currencies alone, it can take into account the price of gold quite simply in drawing up a trading plan by indonesian futures companies. Of course we still cannot deny other fundamental issues and also related factors. However, the movement of the four currencies can be a fairly good starting footing in compiling gold trading plans.