Aussie Dollar Still Under Pressure? Consider Moving Into Gold

Aussie Dollar Still Under Pressure?  Consider Moving Into Gold

When we look at the global currency markets over the last year, one of the largest prevailing trends has been the massive decline in the Australian Dollar.  Most of this bearish activity has been propelled by the reduced potential that the Bank of Australia will move to enact higher interest rates before the end of 2015.  This is almost never a positive for a the value of a currency, and since this outlook is not likely to change any time soon it makes sense for Australian investors to start looking for other places to store their money.

From a national perspective, it might seem as though declining currency values have little impact on the overall net worth of Australian citizens.  But any time a currency is declining, the ultimate suggestion is that your cash holding are losing purchasing power.  One of the most common alternatives in this type of environment is to start looking at the precious metals space — and there is a growing for long-term investors to start looking at gold assets as a viable alternative to cash holdings.

Here, we will look at  recent activity in the SPDR Gold Trust ETF (NYSE: GLD), which is one of the most popular proxies for precious metals investors.  This is a good way of gauging where gold prices are likely to head next, so we will compare this activity to the most common measure of strength and weakness in the Australian Dollar (the AUD/USD).

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SPDR Gold Trust ETF (NYSE: GLD)

Critical Resistance:   125

Critical Support:   110

Trading Bias:  Bullish

GLD / Gold Trading Strategy:  Gold markets look to be in the early stages of a bullish recovery.  Use short-term declines as an entry point for long-term buy positions.  

Gold markets have encountered periods of volatility over the last two years but when we start to look at the recent market activity, there is evidence that things are stabilizing.  According to Tony Davis, gold markets analyst at Atlanta Gold & Coin Brokers, “gold prices have started to rise after hitting the important psychological level at 110 in the GLD fund.”  This is important for gold investors because it ultimately suggests that we are starting to see an asset market that has reached its bottoming phase.

Long-term investors tend to be best suited by financial environments where it becomes possible to buy low and sell high.  So, for those looking at assets that are ripe for a bullish turnaround, there are many strong arguments to start buying gold at current levels.  Markets are still significantly below the all time highs, that can be found above 1,900 relative to the US Dollar.  This means there is still great upside potential for those that are willing to take a conservative outlook on the metal.

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Australian Dollar vs. US Dollar (AUD/USD)

Critical Resistance:   0.9200

Critical Support:   0.7500

Trading Bias:  Bullish

AUD/USD Trading Strategy:  Outlook still appears as though we are in a stalling period.  Stay on the sidelines until we start to see more forceful activity to the topside.  Major support is now seen at 0.7500.

Activity in the Australian Dollar (AUD) still appears to be focused on the downside, so it makes little sense to keep savings in cash at this stage.  This outlook is likely to continue as long as we see stalling activity in the sideways direction.  One clear indication that this environment is changing would occur if we see a forceful move through the 0.8000 level in the AUD/USD.  As long as markets continue in the current direction, look to establish investment positions in other assets as keeping holdings in cash is likely to diminish purchasing power for those keeping cash assets.  From a comparative standpoint, all of these scenarios favor gold on a comparative basis and this is likely to continue until at least the latter parts of this year.