Gold & Oil Forex Strategy

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This video is on the correlations between commodities and currencies. More specifically, we’re going to be looking at what effect gold and oil has on the forex market.

To look at this relationship, we have to look at some fundamentals. Which countries import gold and oil and which countries export them. This is good for long term traders because anytime you trade on fundamentals, you want to look long term.

Ok, so who imports gold? The US, Switzerland. India. In fact, India is the biggest importer of gold in the world. These countries will have an inverse relationship with gold.

Now, who exports gold? Australia. New Zealand. The US. The UK. United Kingdom is the biggest exporter of gold in the world. Sure there’re countries in Africa and other places, but we’re going to stick to the major currencies that are traded. So, Australia. In the exporting countries there will be a direct relationship.

So, we pair these two together and get: AudUsd and AudChf This is the currency for Switzerland: Chf.

When gold is on its way up, audusd will be going up because Australia has a direct relationship with gold and usd has an inverse relationship with it. So you buy aud and sell usd. For the pair audusd, you would buy.

When gold in on its way down, you would sell audusd. And vice versa.

Look for discrepancies in this relationship and take advantage of them. For example, if you notice that gold is up and audusd is still flat or going down. Then it would be a good time to go long on audusd.

The top oil exporters are, in order, Saudi Arabia, Russia, US, UAE, and Canada.
The top oil importers are, in order, US, China, Japan, India, and S. Korea.

Taking out the currencies that are NOT the majors leaves US and Canada as the top exporters and US and Japan as the top importers. Since the US is an exporter AND importer, we’ll take that one out as well. That leaves Canada the exporter and Japan the importer.

When oil rises, CAD will rise and JPY will fall. So CADJPY, or the loonie-yen as some call it, will rise. And vice versa. When oil falls, CAD will fall and JPY will rise. So CADJPY will fall.

Timing is very important when trading based on these relationships. When you see that the currency is lagging behind the commodity, that’s your signal. Not necessarily when you place the trade, but you can get ready for a trade. Because that lag could continue for a while and you could be stuck in a losing trade. But once you see the trend turning, you can jump in then.

This is a long term strategy. Look at the weekly and daily charts. And it’s not an exact science. The accuracy is about 80% on this strategy. It’s not for most people, because most people are not going to hold on to a currency pair for months.

Trading forex involves high risk. Trade only with funds you can afford to lose.

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Wan Zahari says:

useful tips, thanks

Zipho Madolwana says:

Great video!! Thank you. Does this strategy apply to CAD and OIL as it is with AUD and GOLD?

Rafael Donado says:

It is a good idea, but is just that, an idea. The correlation is not perfect (100%), and you can lose a lot of money if you try an strategy based on this video. Make a little backtesting and you will see the reality.

J S Bath says:

very good video, thank you very much!!

Moh Hafi says:

why gold goes up oil goes down

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