Is Gold's honeymoon over? Looking at the Aussie
Said Mario Singh, "Besides the Dollar Index having a close negative correlation with the U.S. Dollar, I also noticed that Gold had an extremely strong correlation with the Aussie Dollar in the past six months. Hence, the expected "Aussie bear" might suggest a continuous downward momentum for the Gold price."
To view the image associated with this press release, please visit the following link: http://media3.marketwire.com/docs/gold0708.jpg
Source: Bloomberg, FXPRIMUS
"As one of the major gold mining countries, Australia's producers suffered tremendously on the price of Gold dropping. According to the total 200 gold miners under the Australian Securities Exchange (ASE), average return was down 45% since the beginning of the year, while the AXS 200 still managed to edge 1.5% higher. Mining sectors suffering on the lower material pricing always provided more room for the Reserve Bank of Australia (RBA) to further ease monetary policy. If Gold and the Aussie move in tandem with the theory applied, I continue seeing further downside risk for Gold, he said.
To view the image associated with this press release, please visit the following link: http://media3.marketwire.com/docs/aust0708.jpg
Source: Bloomberg, FXPRIMUS
Another factor not to be ignored, largely impacting the commodities price as well as the Aussie, is China's growth. One of the biggest credit squeezes in June could put the country at risk to miss the government's annual target at 7.5%. Government targets usually serve as the "bottom line."
"Despite the People's Bank of China's (PBOC) statement, further bailout will be available but conditions will apply. The new government's determination to reform looks strong at the moment and aims to build a strong reputation and credibility. Hence, I continue seeing more downside risk for the Aussie due to its high correlation with the Chinese economy." He said.
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