Kofnas: Let’s consider the following strategy of trade. At first gold is acquired and then trading gold against currencies offering new scenarios of trade. For example, the yen could depreciate faster against gold, than against US dollar. Is it the real scenario?

Hamilton: Yes, gold definitely can be traded for other currencies. If the yen depreciates concerning dollar gold price for yens raises much faster than the dollar price of gold because, finally, somewhere the delivery chain becomes isolated Japanese investors convert the yen in dollars and buy gold. This scenario in accuracy recouped some years ago in Japan. Trading strategy for gold and currencies changes depending on in what currency your assets are denominated.

If they are denominated in US dollars gold provides hedging against the falling dollar or the speculative rate on dollar downing. If your assets are denominated in other currency gold, first of all it insures you against any decrease in your own currency concerning dollar and, secondly, protects you from decrease in US dollar which anyway is the world reserve currency, concerning gold – the definitive historical form of money.

Short-term currency traders can easily play increase or falling of the dollar price of gold which, finally, determines all prices of gold in domestic currency. However, unfortunately, the history teaches us that long-term traders actually have only one rate with high probability of success. As the governments infinitely depreciate the currencies through inflation, currencies constantly become cheaper concerning gold. In long-term prospect, the gold price will raise in all currencies which offer grows faster rates than the global offer of gold.

Thus, finally, the pair gold/dollar really is a primary exchange rate of gold which currency traders should watch. Changes of an exchange rate of gold/dollar are quickly rolled on all markets, influencing the local price of gold in any other currency of the world.

Kofnas: If gold grows so it means the rice go upward what strategy for trade in currency you will recommend?

Hamilton: In general if the price for gold goes up the US dollar will fall. The best strategy for currency traders at this scenario consists in going to the long party on gold and short on dollar. On other currencies there can be also a trade in the short party, but primary action will be in the dollar price of gold. The world perception of the price of gold depends on the gold price for the world reserve currency. Any considerable rally on gold will be accompanied, finally, by dollar easing that we and observed last years. Sell US dollars if you are assured that gold is going to rise.

So I hope that this information will we useful for you and interesting and also it will teaches you something new about the forex market and gold trading that you haven’t known before.

For those who want to participate in forex trading should start from learning the basics of this market to make sure you do not experience problems with this industry.

There is another option – you can hire experienced traders to managed your trading account – read more about forex investment here. Also make sure to search for the knowledge in a good forex book.