Using Commodities to Trade Forex
Results 1 to 3 of 3
  1. #1

    Default Using Commodities to Trade Forex

    I read that you cause use commodity prices to help you trade forex. Is this true?

  2. #2
    Join Date
    Dec 2006
    Commodity prices such as gold and oil can have tremendous effects on the currency markets.

    Seasoned traders will often watch gold and oil futures to predict movements in specific currencies. This strategy works well when a country is a significant producer or importer of gold or oil.

    Changes in the price of those commodities translate into changes in revenue for the domestic corporations. The currencies most directly affected are AUD, CAD, NZD, and JPY.

    Looking specifically at gold, trading the Australian dollar is similar to trading gold. The Australian dollar has an 80% positive correlation with gold prices.

    This means that when gold prices rise, AUD appreciates as well. Traders who understand and often trade gold have a lead on others when trading AUD.

    The key advantage to trading gold and AUD/USD together is that it allows traders to leverage the same views, while diversifying risk.

    The strong correlation between gold and AUD/USD stems from Australia’s status as the world’s third largest producer of gold, representing over $5 billion in exports each year.

    As gold prices rise because of weakness in the U.S. dollar or gold supply dwindles, Australian domestic gold producers benefit significantly. Foreigners will have to pay more to import gold, which leads to a rise in the Australian dollar.

  3. #3
    Join Date
    Dec 2006
    Wichita Falls, TX
    In terms of non-commodity currencies (EUR, GBP, etc.), Gold prices can tie in very closely with strength or weakness in the USD. Likewise with Oil. Both commodities are priced in USD terms, so weakness or strength in the Greenback will impact on those prices.

    That said, it's not a 100% thing. Commodities have supply and demand considerations which have pricing impact not at all related to currency values, plus flight to safety considerations for gold in the case of global instability. You cannot assume corellation all the time.

Forum Sponsors

Similar Threads

  1. Can I trade forex part time?
    By sporontinno in forum Forextown
    Replies: 53
    Last Post: 06-01-2016, 05:07 AM
  2. Why trade forex?
    By geline in forum Free Forex Trading Systems
    Replies: 12
    Last Post: 09-18-2014, 03:14 PM
  3. Pls I Need Serious Assistance On How To Trade Forex.
    By award5b in forum Free Forex Trading Systems
    Replies: 3
    Last Post: 08-17-2012, 02:47 AM
  4. Seperate Entity To Trade Forex
    By PhillyForex in forum Newbie Island
    Replies: 1
    Last Post: 01-16-2008, 01:03 PM
  5. When To Not Trade Forex
    By flying_forex in forum Newbie Island
    Replies: 2
    Last Post: 08-03-2007, 11:52 AM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
"Aerodynamically the bumblebee shouldn't be able to fly, but the bumblebee doesn't know that so it goes on flying anyway."
Mary Kay Ash