Financial markets are undergoing historic transformations today with an overriding theme being a developing transition from our previous era of low risk, low return on investment. The Australian Dollar (AUD) is developing encouraging signals of a possible bullish reversal versus the US Dollar (USD). Such strength is particularly clear as it breaks out above the 200-day Simple Moving Average (SMA). Gold prices are recovering, part of a larger rebound. They were just recently recovering from bottoms around $3,300 per troy ounce and retesting the $3,330 area.
And while gold has been quite volatile over the last several weeks, the last few trading sessions have shown a strong comeback in demand. After a spring of disappointing lows, the price of the rare metal has reclaimed its glory and turned heads among investors and traders alike. Analysts are describing a robust comeback from the bottom, indicating improved demand from investment buyers. This increase coincides with gold prices nearing the $3,330 resistance line.
At the same time, the US Dollar has lost many of its daytime gains, adding to a market-wide risk-on aspect. In this context, as the USD weakens, investors are hungrily searching for higher yielding riskier assets. This trend creates a favorable near-term bullish environment for currencies like the AUD. This change fulfills 2 out of the 3 often-expected shifts for the AUD/USD. It will continue gaining upward momentum if it is able to remain above the important 200-day SMA.
All eyes now shift to Australian inflation figures, due out on Wednesday. Market analysts are hoping that these figures will provide better clarity of broader economic trends. Beyond that, they think these insights can affect currency performance and commodity prices. Mounting inflationary pressures would add to the AUD strength, further underpinning the bullish view for the currency pair.
The relationship between gold price and the value of USD (inverse) continue to be a primary concern for speculators. Now, as gold starts testing major price points, a weakening or strengthening USD may complicate these bullish market dynamics. Developers and investors are keeping a close eye on these trends, as they may foreshadow larger tides shifting investment strategies away from traditional classes of assets.