Hey Joel,
If remember correctly AU and Gold were "Correlated" some days ago and now there moving exactly opposite.
Any Insight?
Random thoughts? Sure
The problem with the whole 'commodity currency' thing that people love to throw around is that it sounds nice and commonsense - until it breaks down.
You have to look at overall market sentiment. In normal times, audusd and gold will be nicely correlated... because they are both priced in terms of USD. USD down automatically means AUD and gold up (here is where I would throw in ceteris paribus to sound more professional and sell more ebooks).
Importantly, gold is seen as a commodity, and Australia makes a decent amount of it. In fact, a huge amount. So you get the nice purchasing effect (people wanting gold means an increased demand for AUD) as well as the export effect (gold makes up a huge proportion of our national exports, so rising gold means more income - which increases national income which, eventually, leads to higher interest rates...which leads to an increase in demand for AUD in the carry trade).
But when we move away from a 'normal' market and into one where risk aversion becomes more important - ie, recently - the relationship breaks down. Now, AUD is seen as a speculative currency , and USD and gold are seen as a safe haven (ie, a hedging vehicle rather than a commodity). So negative news will see a selloff of AUD (mostly in exchange for yen and USD - the unwinding of the carry trade), and money flowing into gold. So the exact opposite.
I guess, like everything, it is all about context.
When you have to shoot, shoot. Dont talk.
one of several posts that almost often gets overlooked due to to the speed of this thread.
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