Gold Price Down in AUD Terms: AUD, DXY and USD

Gold Price Down in AUD Terms: AUD, DXY and USD

At time of writing, the price of gold in AUD terms stands at $2,591.33, down 0.23%.

Today we look at four charts to explain what’s happening with the gold price in AUD terms.

Chart #1: Gold price in AUD terms

You can see that the price of gold in AUD terms ran up against resistance at $2,720, a remarkable five times:

Gold Price in AUD - Aussie Dollar Gold Price Chart

Source: tradingview.com

Since a sell-off starting in mid-May, it has clawed back about half of the drop and is in an uptrend that appears to be losing momentum.

Why you ask, did the gold price in AUD terms lose some of its steam?

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Chart #2: Aussie dollar gained against USD

After a long slide against the USD and a plunge that lasted from the start of the year through to the March market lows, the AUD has started to gain ground against the USD:

Gold Price in USD Chart - US Dollar Gold Price Chart

Source: tradingview.com

You can also see some potential resistance on the chart at around 70 cents.

There are a number of factors behind the recent improving fortunes of the AUD.

These could include improving Chinese factory output, which flows through to the prices of Aussie commodities, and the relatively low number of cases in Australia.

Remembering that at one point in the aftermath of the GFC, the AUD and USD were on par.

It’s possible that the AUD may stay range bound in the short-term, meaning it is important to put this movement in the context of the US Dollar Index [DXY].

Chart #3: US Dollar Index [DXY] spiked and then slid hard

In March, as panic set in, the familiar rush to US dollars began in earnest.

This showed up as a massive spike on the DXY chart:

Gold Dollar Index Chart - DXY Chart

Source: tradingview.com

It has since been falling hard and is now at a more normal level, if not slightly below where it was for most of last year.

Part of the slide could potentially be traced back to the expectation that the US Federal reserve will keep interest rates low for a sustained period of time.

Not to mention the massive, and rapid expansion of the Fed’s balance sheet during the March panic.

As a result, I believe the weakness of the US dollar is playing into the gold price in USD terms.

Chart #4: Gold in USD looking bullish

You can see the gold price in USD terms is now on the cusp of breaching $1,800:

USD Gold Price Chart 2

Source: Tradvingview.com

This looks like a more bullish chart than the gold price in AUD terms.

The rise, except for the March panic looks steadier.

That’s not to say the price of gold in AUD terms won’t eventually puncture the $2,720 mark.

In a roundabout way, the point is more about the current stability of the AUD in the short-term, cooling the rise of gold in AUD terms.

For now…

A sharp fall in the AUD would likely have implications for the gold price in Australia, something to keep in mind.

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Regards,

Lachlann Tierney,

For The Daily Reckoning Australia