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The Australian Dollar (AUD) is the official currency of Australia and all of its territories. It is also sometimes informally referred to as the “Aussie”. It replaced the Australian Pound in 1966 and was pegged to the US Dollar the following year. In 1983, the Australian dollar became a free-floating currency.

AUD and gold

AUD is special among the major currencies as it belongs to a rather small group of “commodity currencies”. Currencies are moved by many factors, including supply and demand, politics, interest rates, speculation, and economic growth. More specifically, since economic growth and exports are directly related to a country's domestic industry, it is natural for some currencies to be heavily correlated with commodity prices.

After coal, iron, and petroleum, gold currently ranks fourth in value of all Australia’s merchandise exports.  

Currently, Australia is the third largest gold producer in the world, sailing out about $5 billion worth of the yellow treasure every year. The gold price and AUD/USD have a strong correlation historically. When gold goes up, AUD/USD goes up. When gold goes down, AUD/USD goes down.

What moves AUD?

I. RBA Monetary Policy

The task of managing Australia's currency has been delegated by parliament to the Reserve Bank of Australia, also known as the RBA.

The RBA’s mandate is to maintain price stability and full employment as well as to provide economic prosperity for the people of Australia. As a way to achieve these objectives, the RBA set an inflation target of 2-3%. The central bank uses policy instruments such as interest rate hikes and cuts, as well as open market operations to achieve their target. The most important monetary policy tool of RBA is the interest rate on the overnight money markets

The central bank also holds press conferences where markets can approximate the direction of interest rates based on hawkish or dovish rhetoric from RBA officials. Additionally, indicators of economic activity such as GDP and CPI reports, along with PMI surveys, have a noteworthy effect on the Australian unit by way of shaping RBA