Commodities, namely gold and oil, have a substantial connection with the forex markets. Understanding the relationship between gold, oil and currencies can help forex traders gauge risk, forecast price changes as well as understand exposure.

Gold and oil prices essentially tend to move based on almost similar fundamental forces that affect a few currency pairs. Four major currencies, the New Zealand Dollar, the Australian Dollar, the Canadian Dollar and the Swiss Franc are considered to be commodity currencies.

The NZD, CAD, AUD, and CHF all have strong connection with gold prices. Natural gold reserves and currency laws in these countries result in almost mirror like movements. The CAD also tends to move with the oil prices.

However, the correlation is not that strong. Each one of these currencies has a correlation with gold and oil and the fundamental reasons of doing so.

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