03 September 2015

Outlook for Aussie gold on exchange rate weakness

Back in July I said that “an investment in AUD gold may represent a reasonable bet” given that “the general consensus on the Australian dollar is that it will continue to weaken due to a poor economic outlook with commodity prices falling”.

Today, Australian media are reporting that the AUD/USD exchange rate will reach 0.60 by end of 2016. First is Deutsche Bank chief economist Adam Boyton quoted as saying that the dollar will keep falling to US60¢ by the end of 2016 and he “wouldn’t be surprised if the Australian dollar is printed with a ‘five’ handle in the next three years”. That article also says “Suncorp senior economist Darryl Conroy is also expecting the dollar to fall towards US50¢”. The Sydney Morning Herald was quoting AMP chief economist Shane Oliver as saying “he expects the dollar to reach US68¢ by the end of the year and slide to US60¢ throughout 2016”.


If the Australian exchange rate does fall to USD 0.60, then that puts a strong floor under the Australian gold price. The following conservative USD gold prices at that exchange rate equate to:


USD 800 = AUD 1,333
USD 1,000 = AUD 1,667
USD 1,200 = AUD 2,000


The chart below puts those moves into context. [read more]

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