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What Drives The Gold Price In Australian Dollar (AUD)?
2020-03-20 2377

With stock markets plunging, fear gauges like the VIX soaring, it has been an interesting time to say the least for traders and investors.

One of the early beneficiaries of the stock panic was gold. At times the metal acts as a safe-haven. As markets fell and China shut down the economy investors bought the metal, sending it much higher in terms of the US dollar, close to $1700 a troy ounce.

Since then it has sold off - but what does all this mean if you’re living in Australia and your domestic currency isn’t US dollars but Aussie dollars? 

This article will explain the fundamentals that are currently driving both gold and the Australian dollar, helping you make an informed decision on how to trade here at Mitrade.


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A Very Short History Of Gold

Since the end of the second world war, and the signing of the Bretton Woods agreement the US dollar has been the world’s reserve currency.

Meaning that, as far as international transactions go the settlement currency has been US dollars. 

This has been a major boon to Americans and their standard of living.

As the world’s reserve currency, all strategic commodities on the world markets are priced in dollars, be it, oil, copper, silver or gold.

For many years the gold price was set at $35 an ounce. Owning it was illegal as a US citizen but foreign holders of US dollars were able to exchange them for an ounce of gold for one dollar.

This all changed in 1971. 

The French president, Charles De Gaulle recognised risks in holding too many dollars and was rapidly exchanging them for the metal, which was starting to fly out of Fort Knox - much to the alarm of President Nixon.

And so, in 1971, the gold window was closed and no longer could anyone exchange their dollars for gold.

Rampant inflation due to the Vietnam war, and two oil price shocks in quick succession, saw the gold price rise from $35 an ounce to a price high of $850 in 1980.

After this large price spike, the metal went into a 20-year bear market, finally bottomed in the early 2000s.

And once again started rising, first slowly and later much quicker. This is where we found ourselved today, with gold trading between $1500 and $1700 a troy ounce.

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What About The Gold Price In Australian Dollars?

But the gold price isn’t just moving higher in US dollar terms. The gold price in AUD is outperforming the gold price in US dollars. 

In fact, in Aussie dollars terms gold is actually at an all-time high!

This means, as an Australian based investor you’d have had a better return on your investment in gold than a US investor would have.

Look at the table below (data from to see the performance of both two currencies against gold since 2014.

In all but 2017, the gold price in AUD outperformed gold in USD.

Why Measure Gold In Different Currencies?

To answer this question we need to look at the driving forces behind gold, the Aussie dollar, and the US dollar.

We will take a look at some of those factors in a moment but first... why measure currency against gold at all?

It seems strange why we’d measure gold against the Australian dollar when on the world markets gold is priced in US dollars.

For FX traders though, measuring gold in different currencies is vital. It’s not always easy to judge the performance of one currency against another - so gold acts at the perfect calibration.

For example:

If we’re looking at the AUD/USD and it is going higher, is that because of AUD strength or USD weakness? 

Alternatively, if the AUD/USD is going lower, is that because of AUD weakness or USD strength?

It’s probably both. But to what extent? Not always easy to tell.

But if instead, we value our Aussie dollars (or other currency) against  gold, a clearer picture soon emerges.

Gold is a neutral asset

This means no central bank can print it out of thin air. 

It has no interest rate component.

It cannot be affected by monetary or fiscal policy.

In short the supply of gold is fairly static compared to currency.

The only thing that could affect gold supply so quickly is if an alchemist was to find the secret to turn lead into gold – and let’s face it, that isn't likely to happen any time soon!

So, gold acts as a neutral asset that we can use to gauge a currencies true performance.

So what has been happening of late with the performance of gold in Aud?

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The Historic & Recent Gold Price In AUD

From 2010 through to 2018 the price of gold in AUD fluctuated between a price low of $1200 and high of $1800.

It was in a long sideways movement. As can be seen below. But, from mid 2019 the price broke out of the long trading range and in just over a year has surpassed $2400 an ounce.

10 years Gold price chart in AUD

5 years Gold Price Chart in AUD

The five year chart gives a better picture of its breakout in 2019.

1-year gold price in AUD

And in the one year chart it can be seen even clearer the uptrending gold price in AUD. 

Source from Goldbroker

What Drives The Gold Price In Australian Dollars ( AUD)?

Many of the factors that affect gold are the same whether you measure the metal in USD or AUD. 

Below are the reasons why the demand for gold right now is so high and why it is likely to remain high for some time to come.

●  Investment Demand

As a long-term investment gold has multiple benefits.

It has a lower volatility profile than either stocks or bonds and is a non-correlated asset to both.

This makes it popular with institutional investors, like large pension funds, who prefer slow and stable gains to their asset allocation mix.

Pension funds have been purchasing gold in ever larger quantities, quadrupling their buying in the span of 20 years.

Shunned as an alternative investment for a long time, gold only really came into the mainstream with the advent of gold-backed ETFs. Hedge funds and mutual funds have been major holders of gold in ETF form, and this shift has seen gold demand investment grow on average 14% a year from 2001.

The gold-backed ETFs now hold 2900 tons of the shiny metal. Making them among the biggest holders of gold in the world.

Investment demand for gold is a growing trend and not likely to end soon

●  Central Bank Buying

Central banks have been net buyers of gold since 2010. This has been led by emerging market money authorities with record purchases of nearly 700 tons of gold. 

2019 saw strong purchases of gold from central banks of  Russia, Turkey, Kazakhstan, Poland and Hungary.

The outlook for 2020 remains similar with central banks looking to diversify their excess dollar holdings.

●  Coming Fiscal And Monetary Policy

Recognising the severity of the ongoing Coronavirus crisis, the RBA on the 3rd March cut rates to a record low of 0.5%.

In its policy statement, it said it was ready to drop rates further and was also standing by to pump as much liquidity into the market as need be.

And on the 17th March, it pumped a staggering A$12.7 billion into the banking system true to its word.

Meanwhile, the Federal Reserve recently said that it was in no rush at all to drop rates dramatically - yet on 16th March it slashed them a full percentage point, leaving rates at 0.25%!

And like the RBA has unleashed a tsunami of liquidity to help out failing businesses and struggling households.

Since deadly Coronavirus emerged out of Wuhan, and is now taking a grip of America and much of the western world, both Wall Street and main street have been in total panic with the likes not seen the second world war or even the great depression.

Consumers have been in a panic buying essential goods such as toilet paper, and food such as tinned goods and pasta.

There has been an almost complete shutdown of the US economy to stop the spread of the virus.

This has affected service sector businesses hard, and there has been a massive spike in unemployment claims.

What options did the central banks of the world have other than to print money? Probably none. 

And because of all this it will likely be gold that is the major beneficiary. 

●  The US Dollar And The Australian Dollar


As with the last financial crisis there is currently a scramble for US dollars. This is likely to be short-term in nature but such has been the need for dollars it has accelerated downward pressure on the AUD/USD.

The currency pair has been in a long term downtrend as can be seen looking at the monthly chart below.

If you look to the right of the chart and the very last red candle; you can see a large fall in the exchange rate as a result of the Coronavirus panic.

Whether we like it or not, the US dollar is still the reserve currency of the world, and as was proven during  the Lehman Brothers crisis, during shocks to the financial system, there is a run to the US dollar.

While interest rate differentials are currently in favour for the AUD with such a dramatic slow-down in China, global markets in turmoil, and problems in the credit markets, the US dollar is acting as a safe-haven for now.

This is also reflected in the gold price in AUD terms.

Fundamentals Of The Australian Dollar

Despite the relatively small size of the economy (13th in GDP size) and small population, the Aussie currency punches well above its weight in terms of importance. 

The AUD is one of the five most traded currencies in the world.

The fundamentals of the AUD are favourable for three main reasons.

●  Geology

The geology of the country means it’s a giant when it comes to natural resources such as:




iron ore





Located on the cusp of SouthEast Asia and with proximity both China and India, Australia has all the benefits of being in a region of the world with the fastest GDP growth.

Most of this is due to China's emergence of a major superpower, and this has had a knock-on effect elsewhere in Asia.

China and much of Asia has become dependent on the raw materials that come out of Australia. This, in turn, has meant that Aussie dollars have been in very high demand

●  The western political system, laws and language

While Australia is an Asian country, historically it has been aligned with the west in terms of laws, language and geopolitics. 

Its political system and business laws are based on UK law and it is no small advantage because its national language is English, which is the most widely spoken business language in the world.

These mean it is relatively easy for business to take place. 

●   Reliance on China

Australia's proximity to Asia is generally a plus, but it can also be argued the country is too heavily reliant on China.

Over the past two decades, China has experienced truly massive growth, from around 3% in 1992, up to an average of 10% growth the next decade.

But recently that growth has stalled, dropping to as low as 6% - with many western economists even questioning that.

With China, there is also an underlying problem with the financial system, particularly large state companies that have been operating with far too much debt.

And the aggressive building of cities on a large scale, many of which are virtually empty.

These problems typically exist at the top of a financial bubble, and this has not gone unnoticed in the currency markets. 

Finally, with the Coronavirus pandemic hitting China growth hard, the effects on the AUD dollar have been severe. While the US and Europe are somewhat diversified from China, Australia is not.

This explains why since 2012 the AUD/USD has been trending lower. And this is the reason why gold price AUD is currently hitting new highs of over $2500 as can be seen in the chart below.

Is It A Good Time To Trade Gold In AUD?

One of the most dangerous things to do when markets are hitting all-time highs is to think about shorting them. This has got speculators into trouble throughout history.

Strong momentum markets get stronger, not weaker.

But, does that mean it’s the right time to buy gold if you’re an Australian investor? ( XAU/AUD)?

Not sure of that either. 

Traders and investors need to be buying markets once they’ve pulled back in uptrends, not when they’re pushing new all-time highs.

Fortunately, the XAUUSD has just had such a pullback in response to the surging US dollar. Having hit a high of $1680 it is now trading around the $1500 mark. The XAUUSD may have more downside to come, but it’s a lot safer to get long now the big sell off has happened already.

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Trading The Gold Market With Mitrade Australia

You can trade XAUUSD with gold CFDs at Mitrade app and webtrader.


If gold is in a long-term bull market (which this author seriously thinks it is) then it will not be too long before the gold price USD is once again moving higher.

Want To Join The Gold Market? 

Finding opportunities in their rising value OR their drop with trading Gold derivatives - contracts that track their change in value (CFDs) !

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Specifications for trading gold on Mitrade platform: 

Symbol: XAU/USD

Contract size: 100 Troy Ounce

Minimum volume per trade: 0.01 Lots

Maximum volume per trade: 30 Lots

Leverage: 1: 100

Average Floating Spread: 35

Minimum Stop Order Distance: 50

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Hopefully, this article has given you an idea of the drivers behind the gold price in AUD. With gold already moving substantially higher in AUD terms maybe the better trade is to trade it in US dollars with the XAUUSD.

If you want to know more about how to trade gold online like a professional trader read here.

Happy Trading

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