XAU/USD climbs to 1-week tops, around $1960 region amid weaker USD
XAU/USD climbs to 1-week highs, around $6200 region amid weaker USD against other currencies. With stronger US Dollar, the currency will gain in value and in time it can reach a very high level against other currencies as well.
As the dollar continues to depreciate against most major currencies, the XAU/USD Currency pair continues to do well and can continue to climb higher. The stronger US Dollar is expected to result in higher foreign direct investment (FDI) in Australia. If more FDI comes into Australia, then the Australian economy will also benefit greatly.
The current economic situation in Australia can be viewed as a mirror of what is currently happening in the United States. The Federal Reserve is expected to continue to do its utmost to keep rates from going too low, while the Fed has set a record of keeping its key interest rates at record lows.
Most central banks are expecting higher interest rates to boost the economy and inflation, which they hope will help reduce unemployment. For now, this is an assumption based on the lower US Dollar. When the dollar begins to strengthen, the FX rates will become more competitive and the Australian Dollar will begin to appreciate against the U.S. Dollar and other major currencies.
As the strong US Dollar is expected to remain high for some time, the XAU/USD will remain in a very strong position and may continue to climb to record highs. As the dollar strengthens against most major currencies, the XAU/USD will lose its value against most major currencies but will regain strength over time if it continues to trade against the weaker US Dollar.
This is expected to give Australia a solid advantage in the global economy and also keep many investors from looking for weak currencies that can move down. The XAU/USD is well positioned to ride out any weak currencies and continue to appreciate with the stronger US Dollar.
If the XAU/USD is able to ride out any weak currencies, then many investors may end up enjoying a long term gain because the strong USD will result in higher growth and higher income. If the weak currencies continue to depreciate, then many investors would experience a short-term loss on the XAU/USD due to their trading position being undervalued. When the stronger US Dollar starts to gain strength, the XAU/USD will start to appreciate and the losses will become less frequent.
There will be a time when the stronger USD is the one that pushes the XAU/USD down and this is considered as the beginning of the weakening phase of the stronger US Dollar. and the depreciation is expected to continue for a period of time.
However, it is expected that as the XAU/USD continues to appreciate over time and the stronger USD is the one to push it down, the weak USD will also depreciate until the weaker USD is pushed down. During this phase, the weaker USD will not have a significant effect on the overall value of the XAU/USD because the stronger USD will be more of an anchor for the currency and the strong USD will be a drag to the XAU/USD.