The correlation between the Australian dollar and gold has been high in recent weeks, as both have stuttered following strong moves higher.
Since July 15, the AUD/USD and XAU/USD correlation study has run between 0.80 and 0.90 (1.0 is perfect).
In explaining why AUD/USD fell from Monday's highs at 0.7184, CBA noted Tuesday: "Gold prices also pared earlier gains overnight and continue to be an important driver of AUD."
Gold's rally to record highs has been driven by the massive amount of monetary and fiscal stimulus provided by major countries and safe-haven strategies in a world full of uncertainties.
Precious metals analysts believe gold will resume its run higher if U.S. Democrats and the White House agree on a coronavirus aid package in a timely fashion.
Meanwhile, the rising tensions between the U.S. and China will continue to encourage safe-haven flows, also helping to keep gold elevated.
But the trend higher is mature and there are technical risks.
If gold was to have a daily close below the 10-day moving average at 2,009, it would warn the trend higher is losing momentum and a correction may be at hand. The AUD/USD has support at the 21 DMA at 0.7116 and a close below would signal the trend higher is over and more downside is likely.
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