Forex traders do not usually pay too much attention to commodities trading. While the two are connected (and some trade in both markets), one does not always spill into the other. However, when it comes to precious metals, foreign exchange trading is necessarily affected. Gold especially correlates with the strength of the US dollar – the currency in which it is priced.
For this reason, it’s important to be aware of the latest mining trends. Supply of precious metals is key to prices, which indirectly affects the Forex market.
Latest mining trends
For the past few years, mining trends have been somewhat the same. The industry is still finding ways to counter threats that have been hurting the value of the metals. The following 4 trends especially highlight the current movement of the mining industry:
1. Riding the waves of political uncertainty: while the industry is not as dependent on political stability as the Forex market, it still has a major impact on mining. Demand is higher in stable economies. The industry is therefore looking for a way to ride the waves of instability in China and the global markets.
2. Financing: equity investors have not been too eager to finance mining, with mining stocks consistently dropping since 2010.
3. Government engagement: government regulations in some regions make it difficult to set and meet expectations. The industry is still seeking the best strategy to deal with government intervention.
4. Innovation: mining is one of those industries that struggles with change. Miners are traditionally conservative, and need to start innovating in a corporate context to support growth. Emerging technologies are crucial to mining, and miners need to adapt to early adoption.
The Forex market
Foreign exchange trading is necessarily connected to these mining trends. Political uncertainty always impacts the Forex market, but so do resources. Decreased demand for resources in a region leads to a weaker currency, as investors seek commodities in other countries.
Government intervention impacts the markets on every level. The Forex market is closely linked to government regulations, as well as government decision making. Following the strategies used in mining will enlighten traders as to what to expect when the Forex market deals with similar engagement.
The mining industry’s struggle with innovation is also significant to the international Forex market. Currency exchange works on a moment to moment basis, depending on political and economic events around the world. Precious metals are equally affected by these events – but the mining industry is sluggish in finding ways to innovate and overcome obstacles. Thus, precious metals are left to the whims of the markets, and Forex traders need to be aware of this volatility.
Forex trading in the mining context
Foreign exchange trading is impacted by mining trends, but it’s important to remember that mining is not the only industry providing a context for foreign exchange. Forex is necessarily reliant on other industries and markets. Mining serves as one example of the demands placed on Forex traders. You have to keep an eye on global events, or you will miss good trades and make poor trades.
The latest mining trends have not changed much in the past few years, but they continue to impact the Forex market. If you are involved in foreign exchange trading, it is good advice to be on the ball in this context.