Gold and the AUD/USD exchange rate

[tomwato]

Excuse my amateur question but this thought hit me the other day. I have no idea in trading gold.

I always see the gold price quoted in USD. At the moment 1AUD=1USD. If you were to purchase gold now and the Aussie was to half its value to 1AUD=0.5USD, would your investment in gold double? This is of course ignoring the movement of the gold price. Lets just say the AUD crashes overnight and halves its value.

[Trembling Hand]

Yes that's right if gold did nothing for the next year but the AUD fell relative to the USD you would make money. Problem is that for Aussie gold fans they are getting the exact opposite effect.

The AUD has been going up cancelling the gold gain against USD. Making it a sh!t traded recently. Not that they ever mention that. No one loses when investing in gold.

Basically its not that gold has been the great trade but rather short USD.

[nukz]

It depends what sort of investment your talking about, gold stocks have performed quite well, you could also look at CFD's/Futures, ETF's and physical bullion.

I would say gold is more of a hedge than anything else, silver is more of a speculative bet.

I don't think its such a bad thing to have a certain amount of your portfolio in gold but for a more speculative metal you should look at silver. That being said there are lots of other products you could invest in like lithium, uranium ect.

The other thing you should probably know is Trembling Hand trades futures so that makes him the authority on ... everything basically. He makes assumptions about people's trading patterns and investments without any knowledge at all. He is sort of like the forum troll

[nukz]

Basically its not that gold has been the great trade but rather short USD.

Although this is not the right section to put this sort of trade its quite a common sense trade taking into account QE1, QE2 and possibly QE3, QE4 ect.

That being said i actually expect the USD to bottom just before Christmas without giving any specific dates on here and expect a short term rally after that and then a further collapse. Unless of course another QE is announced in-between my dates.

Around that same date i am expecting the swiss franc to top out.

[Trembling Hand]

Aud Gold chart. Weekly,

Still in a long term up trend but been struggling last 2 years other than the odd fart upwards then to fall back to old levels.

Might get together my own AUD Si chart out of interest tomorrow.

[sinner]

Problem is that for Aussie gold fans they are getting the exact opposite effect.

Personally, I'm laughing, with a mixed basket of Aussie gold miners, silver miners and physical gold and silver stockpiled over a long time. My attitude to gold $1200 was the same as it was to gold $600 or gold $300 and the "effect" I am getting, is just great.

When I see the people on this forum talking about the likes of IAU, TRY, IGR, etc I laugh. I bought those in 2008/2009 for 0.185, 0.68, 0.135 and after an initial takeprofit they have been sitting in the bottom drawer ever since!

As always, I am happy to convert a portion of my productive efforts into gold or silver at whatever the spot rate is that day. I don't care whether it's a 30 year high or low or a 20 year range. As long as there is a sucker willing to take some of my paper and give me metal, I'll be playing along.

The AUD has been going up cancelling the gold gain against USD. Making it a sh!t traded recently. Not that they ever mention that. No one loses when investing in gold.

The ASX:GOLD ticker has acted as a highly negatively correlated hedge instrument against the ASX200 cash close for 2-3 years. I am unsure why any investor worth their salt wouldn't be examining it as a tool to hedge market exposure. I am always on the lookout for instruments which are negatively correlated to the broader market.

You could have bought STW and GOLD together on the open every week and been fine.

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Basically its not that gold has been the great trade but rather short USD.

Gold has consistently outperformed everything (except probably junk bonds) since the beginning of the year. It went up while the Euro dropped from 1.5 to 1.2. It went up more than the USDX on the night of the flash crash (although admittedly the USDJPY flashcrash that night might have something to do with that). It went up while AUD lost 10% to the mining tax.
Basically it's not that short USD has been the great trade but rather long gold all year long.
Picture 2.png

I checked NDX100, SPX, AORD, Crude oil, Copper, Euro on that perf chart and copper is the only thing coming close to gold for 2010. When you view all those things relative to gold, they are DOWN on the year.

Might get together my own AUD Si chart out of interest tomorrow.

Funny. You are of the type that claims ZeroHedge and the like are doomsday self reinforcing washed out traders or something. Yet they were claiming silver manipulation from day one along with others.

Now that a RICO lawsuit against JP Morgan and HSBCs fraudulent activity in the silver market is pushing it to 30 year highs - basically vindicating all those doomsday washed out traders overnight - you are interested. Mate, you are late to the party. Those of us buying with both hands in 2008 are already drunk and passed out on the floor thanks to the gradual liquidation of 40% of the entire silver market short position owned by the likes of JPM and HSBC. Some of us were lucky enough to buy silver $18 straddles in July. We knew something big was coming down the pipe.
Picture 1.png

But you know what? I'm not gloating over profits on this one. I'm not happy to be right. I would prefer to be wrong on gold and the more right it gets, the more worried about my friends and family I get.

[Trembling Hand]

Funny. You are of the type that claims ZeroHedge and the like are doomsday self reinforcing washed out traders or something. Yet they were claiming silver manipulation from day one along with others.

Now that a RICO lawsuit against JP Morgan and HSBCs fraudulent activity in the silver market is pushing it to 30 year highs - basically vindicating all those doomsday washed out traders overnight - you are interested. Mate, you are late to the party.

FFS!!!! Sinner I'm not late to the party. Personally my trading doesn't give a toss what any instrument is doing longer than todays close. I'm simply wanting to see what silver looks like in AUDs. So what the Fark are you talking about????

Ive always said to the bugs they are in a long term up trend. My point has always been so what, lots of other things have been on trends too. Mostly along a risk trade du jour. And it hasn't been AUD price commods the last two years. No watter how many USD gold charts you want to post.

And your started masturbating over your reply to my comment way too soon. Gold, not gold stocks, if you live in Australia and need to convert back to AUD hasn't been a great trade. As per my chart as per OP theme.

Lather up old boy.

[explod]

FFS!!!! And your started masturbating over your reply to my comment way too soon. Gold, not gold stocks, if you live in Australia and need to convert back to AUD hasn't been a great trade. As per my chart.

Lather up old boy.

A bit testy there Champ, mod's would be onto me.

Gold and silver in physical form is merely a long term hedge. And silver in particular is doing a very good job. When it does adjust to inflation , due to increasing demand we will see silver go at least beyond Aus $200 in the next few years. A nice bit of passsive hedging.

However often wrong, only time will tell.

We indeed live in very interesting times.

Oh,, and took Profs advice and looking at those thingo's you say I need to understand

[tomwato]

Excuse my amateur question but this thought hit me the other day. I have no idea in trading gold.

I always see the gold price quoted in USD. At the moment 1AUD=1USD. If you were to purchase gold now and the Aussie was to half its value to 1AUD=0.5USD, would your investment in gold double? This is of course ignoring the movement of the gold price. Lets just say the AUD crashes overnight and halves its value.

Sorry guys. I am a bit of a amateur and your conversation was getting a bit complicated.

Fundamentally is what I am saying correct? If the AUD was to half overnight and only be worth 0.5USD, if you had an investment in gold, would that in theory double? Assuming the price of gold remained the same overnight.

[explod]

Sorry guys. I am a bit of a amateur and your conversation was getting a bit complicated.

Fundamentally is what I am saying correct? If the AUD was to half overnight and only be worth 0.5USD, if you had an investment in gold, would that in theory double? Assuming the price of gold remained the same overnight.

Lot of factors, but on what you ask, you would probably be talking of a stronger US$ (= weaker Aus dollar)so gold would go down against that.

The bigger picture is that paper money, in all denominations is weakening, as they print more in the face of falling production/work value it is diluting itself.

Against gold, paper money was US$35 to the ounce of gold in 1970. Today it is US$1365 which is 39 times. In 1970 a standard home in Australia was worth about $12,000 if we multiply that by 39 we have $468,000. So on that basis gold has more than held its own. It is said by some that inflation adjusted gold should be around 3 to 4 thousand an ounce.

You are onto a very complex but good question. It is worth Googling and reading up on the "history of gold as money.

[professor_frink]

Sorry guys. I am a bit of a amateur and your conversation was getting a bit complicated.

Fundamentally is what I am saying correct? If the AUD was to half overnight and only be worth 0.5USD, if you had an investment in gold, would that in theory double? Assuming the price of gold remained the same overnight.

yes.

[MR.]

Explod, you complicated a very simple question. He'd be selling not buying!

The answer's yes!

If the AUD dropped in value down to 0.50 against a US dollar and you sold your gold, you have double your money in the land of OZ.

[sinner]

The answer is only yes if the AUD priced in USD moves down to 0.5 and at the same time gold priced in USD remains static. Which, I think would be extremely unlikely. You would be expect gold to be making its own moves on such an occasion and the AUD gold price the next morning would be a reflection of both those factors.

If you want to bet your money because you think the AUD is about to go to 0.5, then forex is the market for that.

If you want to exchange your paper for internationally fungible hard currency, gold bullion is the market for that.

Ive always said to the bugs they are in a long term up trend. My point has always been so what, lots of other things have been on trends too. Mostly along a risk trade du jour. And it hasn't been AUD price commods the last two years. No watter how many USD gold charts you want to post.

That's why I posted the perf chart, to show that gold was going up, not juston the "risk trade du jour", it was going up while USDX was going up, it was going up when bond yields were up.

And your started masturbating over your reply to my comment way too soon. Gold, not gold stocks, if you live in Australia and need to convert back to AUD hasn't been a great trade. As per my chart as per OP theme.

I took the same timeframe as your chart, and plotted it against the SP200. You can see it has performed better. The performance were both priced in AUD, the conversion rate has nothing to do with it. Since the financial crisis, if as an average Aussie investor you had taken your money out of STW on October 3 2008 the day that TARP was announced, and put it into physical gold bullion priced in AUD, you would be up 30% today. No management fees, no counterparty risk, no headaches. The AUDUSD was 0.773 on that day.

Simple.

[tomwato]

Thanks for the responses. So I am correct with what I am thinking. However in the case of a crash of the Aussie overnight, the gold price would make some changes as well.

Cheers

[prawn_86]

Thanks for the responses. So I am correct with what I am thinking. However in the case of a crash of the Aussie overnight, the gold price would make some changes as well.

Cheers

As other have mentioned however, if you are thinking that the AUD will devalue, you are better currency trading than investing in gold. As that way you only have one product risk exposure as opposed to two (currency & gold)

[nukz]

Thanks for the responses. So I am correct with what I am thinking. However in the case of a crash of the Aussie overnight, the gold price would make some changes as well.

Cheers

To some extent this is something that would be great for the gold bugs, the reason is because gold would skyrocket in AUD. That being said even if our dollar stays quite high gold will still trail any explosion in the gold price in USD**

[nukz]

As other have mentioned however, if you are thinking that the AUD will devalue, you are better currency trading than investing in gold. As that way you only have one product risk exposure as opposed to two (currency & gold)

Forex can be good and in the past few years shorting the USD and going long on Canadian/Aussie dollar, Swiss franc but i would deffinetly stress that you should not even touch futures/cfd's without reading up on it as like tomwato stated he's quite new to this.

[derty]

tomwato, I cannot really see the scenario in the near future where the AUD will undergo a significant fall wrt the USD. However, even with the coupled rise in the AUD and Price Of Gold (POG) we are still seeing a gradual rise in the Aussie POG over the last 5 years.

I hold a few GOLD's in my super fund. Apart from a knee jerk grab during the runup at the end of '08 I have been only buying when it is around the long term support. I see it as a relatively low risk investment (Though if it breaks that long term support I'm out of there). Based on GOLD's behaviour over the last 5 years I am expecting a breakout around AU$1500Oz Au (GOLD:$150) and will probably look to exit and buy back in once support is resumed. Just using the GOLD monthly chart I expect the breakout sometime before early 2012.