AUD Slips from 10-Week High, What This Means for the Gold Price

AUD Slips from 10-Week High, What This Means for the Gold Price

If you’ve been keeping a close eye on the price of gold during its meteoric rise, then you might have noticed it took a tumble earlier in the week.

The gold price in AUD terms has fallen 1.83% over the past five days, while it has only lost 0.18% in USD terms.

AUD Gold Price Chart - Aussie Dollar Gold

Source: tradingview.com

This week has been an interesting one for economic developments as countries continue efforts to kickstart their shuttered economies.

So, let’s take stock of what’s happened and check out the forecasts.

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What’s up with the Aussie dollar?

The risk-sensitive Aussie dollar was last at US$0.6561, nearly 1% under the 10-week peak it hit on Tuesday.

The AUD failed to extend gains beyond US$0.66 and drifted lower as US-China tensions weighed on equity markets, souring demand for risk.

Diplomatic relations between the two largest economies have soured in recent weeks with President Trump attacking China’s handling of the coronavirus outbreak.

Tensions have also flared between here in Australia over the government’s role in leading the push for a global inquiry into the origins and spread of the pandemic.

It appears the AUD has been tracking this sentiment.

Not all bad news for gold investors — a lower Aussie dollar generally means a higher gold price (in AUD terms).

AUD Gold Price Chart - Aussie Dollar Gold

Source: tradingview.com

Going forward, if trade tensions between the West and China continue to mount and dominate the direction of the Aussie, then we could be in for softer second half outlook.

What about gold?

The gold price has been edging higher but has recently met with some resistance.

Though making up some ground against the Aussie dollar, the USD has slid against a basket of other currencies, shedding about 0.86% over the past five days.

This has helped buoy the gold price, but there was little movement in US bond yields which continue to generate headwinds.

Investors were probably waiting for the economic data released by The Federal Reserve yesterday.

With nothing apart from the expected released, the gold price tracked higher by 0.35% today.

Gold remains a favourite spot for investors who remain skeptical of the stock market rally’, said Ed Moya, analyst at New York’s OANDA.

It seems like only a matter of time before gold runs higher as the fundamental backdrop indicates global stimulus efforts will continue to grow and the prospect of negative interest rates for the U.K. and U.S. seem to be growing.’

Did it cross your mind to invest in gold ahead of further interest rate cuts? Even though the RBA has said it has ‘no appetite’ for negative rates, the UK has placed negative interest rates under review. Australia could follow eventually. Discover our free guide on how to buy and sell gold here.

Kind regards,

Lachlann Tierney

The Daily Reckoning