Financial markets have always had a relationship with each other since ancient times.
Bullion.Directory precious metals news 02 August, 2017
Alison Macdonald via Submitted Content
Commercial Editor at Bullion.Directory
Consider an example: bonds tend to fall when there is a rise in benchmark equities. Correlations like these are often eyed on by traders and investors who try to capitalise instantly should an opportunity ever occur.
Just like financial markets, the foreign exchange markets are also linked with each other. One of the most common example of this is the strong correlation between Australian dollar and gold.
Australia is one of the largest producers of gold in the world, and so the metal is easily available at online websites such as http://www.goldstackers.com.au and other retail stores as well. The precious metal is closely linked with Australian dollars, simply because the country has many reserves and the metal is produced in such a great quantity.
Considering historical times, AUD and gold have a positive correlation; if gold goes up, so does the value of Australian dollar, and if gold prices decline, the value of Australian dollar also falls. In terms of figures, the correlation is as strong as . Investors often cash onto this opportunity, as they try to make more money. How can you do the same? Let’s delve into the details.
Because Australia is productive
Like the Australian dollar, crude oil and the US dollars are also related to each other, which is because the commodity is priced in dollars. However, AUD and gold are linked because of production, as already mentioned. The rate is dependent on supply and demand as money is exchanged between the miners and the manufacturers.
How can you capitalise on this relationship?
Australian dollar and gold is most suitable for portfolios that are spread out for longer periods. You will not always see a strong correlation every day, but longer time frames significantly reduce the daily volatilities and risks.
General traders trade both of these, gathering cues by keeping tabs on interest rates, economic development and commodity reserves. Since the portfolio tries to capture the overall market performance, trades tend to last longer than a day.
Generally, you should keep an eye on technical formations and hope that correlations will seep in the markets as well. Consider either gold or Australian dollar, and find a solid formation first.
Now if you see an opportunity, jump onto it and make the most of it. Generally, both assets tend to move in sync with each other.
What else should you keep in mind? Here are some more tips that can help you make the most of your gold investment.
- Ensure if the investment time is right. Consider the economic situation, and make a decision accordingly.
- Set your goals for both short and long terms. Come up with a proper investment plan, and then stick to it.
- Don’t drop your plan because of daily market changes. In the longer run, your investment will prove to be beneficial.
- Bring in some diversity in your investment portfolio so as to minimise risks.
Bullion.Directory or anyone involved with Bullion.Directory will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading in precious metals. Bullion.Directory advises you to always consult with a qualified and registered specialist advisor before investing in precious metals.
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