Is Gold’s Historical Correlation with the Australian Dollar and Swiss Franc Predictive?

Sid Norris
 In Blog

Is Gold’s Historical Correlation with the Australian Dollar and Swiss Franc Predictive?

Historical Price movement in Gold is quite similar to price action in the Australian Dollar, especially since late-2008: 

Gold is also highly correlated with the Swiss Franc, especially since mid-2013: 

Recently, notice that during Gold’s April-August plunge, the Swiss Franc moved sideways.  Then, in mid-August, the Swiss Franc stopped basing and started moving strongly to the upside.  Gold has also moved upward since mid-August, although it has lagged the Swiss Franc in aggressiveness.

Now let’s look at the AUD/USD currency pair from an Elliott Wave and Hurst Cycles perspective, first on a weekly chart:

I’m counting the choppy, overlapping rally from January 2016 through January 2018 as a contracting leading diagonal.  Diagonals are typically deeply retraced, and that’s exactly what’s happened.  From January through September this year, the Aussie retraced the leading diagonal by a deep Fibonacci 78.6%.  Also, the downward movement this year has clearly been corrective.  Here’s my internal wave count for the downward movement this year on a daily chart:

Notice the lack of a strong third wave component within the downward movement, as well as the numerous evenly spaced overlaps all the way down.

Importantly, from a Hurst Cycles perspective, a large 18-month cycle trough is due within a date-window of mid-August through early-October.  Within that window, the Sentient Trader composite line is suggesting that the recent low in mid-September is likely to be the low point of that 18-month cycle trough.

Key Points:

  • Gold is traditionally highly correlated with the Swiss Franc and Australian Dollar. 
  • The Swiss Franc refused to move lower during Gold’s recent plunge and now appears to be leading Gold higher.
  • Elliott Wave and Hurst Cycle Analysis both suggest that the mid-September low in the AUD/USD currency pair is a large cycle trough.

Conclusion:

The wind appears to have shifted and is now at Gold’s back.

Sid Norris – ElliottWavePlus.com

Subscribe To Our Newsletter

Register to automatically receive email notification of important new market analysis.

You have Successfully Subscribed!