How Does Gold Relate To Currencies:

Just a short article on Gold, (Xau) One thing I love about financial markets is that there is so much that one can trade except for the major currencies, traders can find what works for them, take for instance S&P500 and Dow Jones, those two are highly correlated, when one is down the other one is down as well and when one is up, so is the other one, there is power in understanding such relations, knowing how currencies, indices, and commodities relate to each other can save you from doubling up your risk in case your trade goes against you and you have unknowingly traded the”same”thing. Any Forex trader can learn how to trade gold and Usd.

There are few things though that we need to keep in mind when trading gold, firstly we need to understand how it correlates with the currencies like Eur and USD, meaning how it relates to those currencies. Gold is denominated in Us dollar but widely used in global markets and by central banks of foreign countries. As the price of dollar weakens, the price of Gold increases, simply because investors tend to dump the dollar in favor of gold during the times of economic stresses. Most Forex traders know that Gold and Us markets tend to move against each other, strong and reliable correlation right there, they form opposite signal almost all the time, when gold gives a buy signal the Us dollar gives a sell signal, and the signal that is formed ahead of  the other one, can also be used as an indicator to trade the other one, when Us Dollar sells off heavily, gold rises, and so is Eur, it rises as well since Eur and gold are known to be “anti dollar”, in many cases a support/resistance level breakout in gold is often followed by resistance/support breakout on Us dollar. Understanding these correlations is very powerful and can have great impact in trading gold successfully and profitably. What you can do is, open both gold chart (same time frame) and USD chart at the same time, study them both and you will eventually see or confirm this correlation, it is not as difficult as you think, see images below. If you want to start trading Gold today, REGISTER HERE. Thank you for stopping by, please do share the post using the share buttons below. For private lessons, you can check HERE.


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