Why AUD & CAD’s Commodity Links Are Weaker Than You Think

The primary source outlines long-established correlations between several “commodity-based” currencies and raw materials like gold and oil—especially AUD, CAD, NZD, and historically CHF. However, when examined with recent market data, those relationships are evolving rather than stable.

AUD and Gold: Historically, AUD/USD correlated with gold at +0.80; Canada and NZ much lower or derivatively similar; USD/CHF negatively correlated. The primary source cites strength of AUD’s positive co-movement with gold as high as 0.8, and USD/CHF inversely so, rooted in Swiss historical ties and gold reserve policy.

Recent evidence (2025-late) shows the 12-month daily return correlation between AUD/USD and gold has slid to about +0.40, indicating a moderate correlation—notably lower than historical claims. Gold has surged by ~66 % over one year, whereas AUD/USD appreciated ~8 % in the same period.

Bank of America and eFXdata flag a “structural shift” in AUD’s exposure: previously gold and risk-assets diverged (gold up, equities down), but more recently, both have rallied in tandem, drawing AUD more tightly into gold-risk cycles. That suggests correlation strengths fluctuate based on regime—risk on/off, monetary-policy divergence, and global commodity cycles.

CAD and Oil: CAD remains strongly connected to oil. As per primary source, Canada ranked among top oil producers, and its currency tends to appreciate when global demand (especially from the US) rises, and decline when demand falters. Recent commodity price behavior in 2025 shows oil underperforming as energy commodities lag, reducing potential tailwinds for CAD.

Strategic Implications:

• Traders relying on AUD–gold or CAD–oil relationships must embed regime-switching models because correlations are contextual and not fixed.
• Carry trades continue to amplify effects: with interest-rate differentials, AUD and CAD can outperform when commodities and risk sentiment improve, but suffer steep reversals in risk-off periods.
• For portfolio managers and central banks, using commodity prices as leading indicators for currency positioning remains valid but with caveats: overreliance could misprice exposures when policy diverges (e.g. Fed vs RBA), or when macro shocks (China, supply chain) reweight correlations.

Open Questions:

• How stable are these correlations during episodic stress (e.g. recession, rate shocks)?
• What thresholds of monetary or geopolitical change break historical patterns—e.g. AUD decoupling from commodities or CAD diverging from oil?
• Can forward markets or futures data provide better, more adaptive leading indicators than spot correlations?