Who doesn’t love trading gold? It’s so far one of the most popular assets in the world, also, one of the most valued, with over $12 trillion capitalization. But what happens when you take XAUUSD and put away the USD part?
- FBS experts decided to figure out what is happening with other XAU-based pairs in this article.
Analysis backstory
FBS decided to analyze gold trading pairs against currencies other than the US dollar to provide a more comprehensive understanding of the precious metal’s performance in the global market. This analysis aims to uncover any potential correlations or trends in the price movements of gold against other major currencies and provide insight into the factors that may be driving these movements. By looking beyond the traditional gold-dollar pairing, we can gain a deeper understanding of the precious metal’s role in the international economy.
Trading gold vs. the USD is classic and pretty familiar to all forex market participants. Therefore, most traders know where gold is now and what its movements were over the last weeks, months, or even years. More interesting is that the XAU/USD chart looks very different from XAU/GBP or XAU/AUD. Take a look at the chart below.
While XAU/USD was moving down from March to October 2022, XAU/GBP stayed in a sideways movement and now is almost at an all-time high. Somewhat similar happened to XAU/AUD, which is only 4.97% below the ATH (all-time high). On the other hand, XAU/EUR didn’t have a rally in the last months of 2022 due to the EUR strength. Let’s dive deeper into the fundamentals behind these movements and provide some technical analysis.
Gold vs. major currencies
Gold prices versus the Australian dollar (XAU/AUD) have been affected by several factors in the second half of 2022. One of the main drivers has been the monetary policy of the Reserve Bank of Australia (RBA). Although the RBA was increasing interest rates throughout the year, hikes were relatively small because the bank was trying to support economic growth.
RBA Cash Rate
However, inflation skyrocketed way above expectations and reached a 20-year high in early 2023. All this has led to a weaker Australian dollar and made gold, a non-yielding asset, more attractive to investors. As a result, the price of gold in the Australian dollar has risen throughout the second half of 2022.
Australia Inflation
The stage was set somewhat differently for the UK. The country was going through hard times, and gold looked like a steady and stable haven against the GBP. One of the main drivers has been the political uncertainty in the United Kingdom. The resignation of Boris Johnson as Prime Minister and the ongoing Liz Truss appointment has led to increased uncertainty and volatility in the market. Notably, Truss failed to comply with PM duties, causing the crash of GBP/USD.
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Needless to say, the UK didn’t handle rising prices, pushing the currency even further down. The combination of these factors has led to a significant XAU/GBP increase, with the pair touching an all-time high in the latter half of 2022.
The EU experienced rising prices, too. Moreover, the ECB started rate hiking way after the Bank of England and the Federal Reserve, causing the EUR to fall for ten consecutive months.
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Technical analysis
Although we are focusing on alternative currencies, the Federal Reserve and the USD have a massive impact on all assets in the world, including gold. Thus, hawkish Fed policy may slow down the USD decline, thus, making it harder for gold to rise.
Talking about the GBP, the country is experiencing the harshest moment of the housing crisis. The energy crisis is here, too, making it harder for the UK to take the economy under control. All this creates so-needed uncertainty for the shiny metal. Thus, XAU/GBP is looking bullish for a mid-term. The breakout of the 1575 resistance will open a road to the all-time high and the 1755 level. On the other hand, a decline below 1510 would mean the outlook has changed and GBP is likely to show strength against the metal.
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XAU/AUD looks differently and reminds of an inversed Head and Shoulders. Buy traders may look for an entry near the support of 2690. Still, as the RBA plays very carefully, we don’t recommend seeking long-term trades in the pair.
Conclusion
The most important thing to understand is that gold loves uncertainty. Currently, there are geopolitical tensions, inflation, deglobalization, trade conflicts, and many other factors affecting gold prices. Also, while central banks are trying to control prices, they create extra volatility, a great option for all traders to enter at desired prices.
- You can trade every mentioned pair with FBS, through a variety of accounts.