Connection between Gold and the Australian Dollar

Елена Берсенева 14 March 2022 664

In this article, we will assess correlation between the price for gold and the rate of the Australian dollar.

Since the primitive times, gold has been viewed as the most reliable money equivalent. Gold is highly appreciated because of its “conversion” to any good or money unit. And today, investments to all types of “gold” reserves are considered as possibility of savings and money protection from inflation.

Gold is produced almost in 70 countries of the world.

According to GFMS Thomson Reuters, gold production was 3,287 tons in 2019. Geography and the structure of gold production in 2019 is represented on the following diagram.

Connection between Gold and the Australian Dollar - Photo 1

Australia is the second-largest producing country of gold in the world after China. In 2019, the country accounts for 10% (330 tons) of the world production of this metal.

Australia is the third-largest gold exporter in the world. The export of the yellow metal is more than 5 billion dollars annually. The export of gold and gold products is around 50% from export of the whole country, it is therefore considered that the price correlation of the Australian dollar and gold reaches 80%.

There is a connection between changes in the price for gold and the Australian dollar rate.

To conclusion

Historical data of quotes of the future for gold.

Timeframe: D1.
The history covers the period from December 1979 until May 2019.
Total: 10,266 values.

Historical data of AUDUSD quotes.

Timeframe: D1.
The history covers the period from December 1979 until May 2019.
Total: 10,256 values.

Analysis of Results

Let us estimate the connection between changes in the price of gold and the rate of AUDUSD by week for the period of 40 years using correlation coefficient:

PERIOD	GOLD/ AUDUSD	PERIOD	GOLD / AUDUSD	PERIOD	GOLD / AUDUSD	PERIOD	GOLD / AUDUSD
1 week	0.192	15 week	0.249	29 week	0.249	43 week	0.264
2 week	0.297	16 week	0.419	30 week	0.463	44 week	0.360
3 week	0.301	17 week	0.113	31 week	0.280	45 week	0.419
4 week	0.129	18 week	0.198	32 week	0.156	46 week	0.468
5 week	0.127	19 week	0.449	33 week	0.291	47 week	0.376
6 week	0.227	20 week	0.328	34 week	0.210	48 week	0.286
7 week	0.114	21 week	0.205	35 week	0.146	49 week	0.298
8 week	0.153	22 week	0.294	36 week	0.309	50 week	0.407
9 week	0.336	23 week	0.244	37 week	0.293	51 week	0.440
10 week	0.141	24 week	0.361	38 week	0.230	52 week	0.253
11 week	0.295	25 week	0.221	39 week	0.319	53 week	0.335
12 week	0.283	26 week	0.275	40 week	0.192
13 week	0.267	27 week	0.240	41 week	0.211
14 week	0.181	28 week	0.250	42 week	-0.138

Correlation coefficients between the changes in prices of gold and the rate of AUDUSD are positive for the whole period under review excluding the 42th week. A moderate positive dependency is estimated at the 19th, 30th, and 46th weeks of the year.

The correlation coefficient for the whole period is equal to 0.247.

A weak direct correlation between changes in the price for gold and the AUDUSD rate has been identified.

Detailed results are shown in the Appendix:

XLSX (0.01 MB)Application to the article 'Gold's relationship with the Australian dollar'.xlsx