How Does Silver Affect the Forex Market?


As we discussed in the previous chapter, USD is negatively correlated with the prices of gold.

But what about Silver?

Yup! It is negatively correlated with Silver too.

And with Copper, Platinum, and well, most other commodities in general.

The reason for this is because most of the world’s commodities are quoted in USD.

Therefore, when the USD rises against other major currencies, this tends to have a negative effect on commodity prices.

And it works the other way too! During the periods of USD downtrend, the prices of metals tend to make some huge gains on the market.

But we always tell you to think positive and for the sake of this lesson, we will take our own advice and explore the POSITIVE correlations of Silver.

To kick things off, let’s take a closer look at Silver’s correlations with AUD/USD.

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The correlations of Silver and AUD/USD

Before we dig deeper into Silver and Australia’s entanglements, it is important to note that Australia is not only in the top three Gold producers worldwide, but it is a MASSIVE producer of Silver too!

silver in australia

That’s a lot of Silver, eh?

You can only imagine the impact such an amount has on the overall economy of Australia…

silver

Now, let’s compare the movements of AUD/USD and XAG/USD over the past 15 years and explore their correlations.

silver
xag usd

Their movements have been prettyyyyyy similar over the past couple of years, wouldn’t you say?

Can you spot the positive correlation between the AUD and XAG prices?

It is pretty out there!

However, this does not mean that AUD and Silver will always move in the same direction and some days/months this may be more prominent than others.

For instance, if we take the same example from earlier, you can notice a certain degree of divergence between AUD and the prices of Silver at the end of 2019.

This was mostly caused by the repeated rate cuts of the Reserve Bank of Australia which significantly weakened the AUD.

However, things had started improving at the start of 2020 (well, between Silver and USD anyway) and the high degree of correlation between those assets had been restored.

Now, why don’t you check what the correlation between XAG and AUD looks like right now? You can check here.

For all I know, you might be reading this article 43 years after it had been published…

Let us know what the correlation looks like in the comments below!

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