How to trade gold, crude oil, and forex

Commodities like gold and crude oil have had close ties to certain forex pairs, historically, leading to traders modeling forex trading strategies off price action in commodities. Learning what commodities are, how they trade, and their correlations to currencies can help give more context when trading forex.*
What are commodities?
Examples of commodities
The commodity asset class is broken down into hard and soft, whereby hard commodities include energies and metals while softs are mainly agricultural products.
- Energy commodities: crude oil, natural gas, gasoline, heating oil, coal
- Metal commodities: gold, silver, copper, platinum, aluminum
- Agriculture commodities: corn, wheat, soybeans, lumber, cattle, dairy
Why do people trade commodities?
Traditionally, commodity markets allow the different stake holders in a process such as crude oil refinement to exchange large, uniform amounts of a good at a single, agreed upon price, and they can help everyone from miners to farmers hedge future production.
Most everyday people take part in commodity markets for speculation on where prices could be headed as well as diversification of investment relative to stocks, bonds, and forex. For example, gold is popular for both speculation given its volatile price swings and alternative investment with its flight-to-quality attributes.
How to trade gold and crude oil
Commodity prices can be volatile since they are singular markets more sensitive to supply and demand dynamics than baskets of goods or stocks. Many use relatively small size when trading commodities and only allocate a 1-5% portion of their investment portfolio to the asset class due to its relatively large price movements.
Speculative trading with commodities
Popular strategies including technical and fundamental analysis can be lent to commodity prices. Technical traders can lay Moving Averages and Bollinger Bands over their charts for crude oil and gold, while fundamental strategists might investigate supply and demand dynamics.
Commitment of Traders reports can help contextualize the landscape for sentiment around commodities. Economic events also influence commodity prices as positive economic data might reflect more demand for crude oil while the opposite might drive demand higher for the flight-to-quality gold.
Investing with commodities
Gold has long been a popular investment vehicle for those seeking defense against inflation or simply a relatively safer haven than stocks and bonds in times of economic distress. In the same way a portfolio or fund might hold part of its investment in cash (usually just 0.1-5.0%), individuals might hold a small portion of their wealth in gold.
Crude oil can draw long-term positions from those thinking that an economic shift is due to occur. For example, those thinking that the global economy might produce and consume more in the near future – expanding economy – might buy crude oil; while those expecting an economic contraction might sell crude oil on the premise of a slowdown and draw on demand.

Correlations between commodities and forex
Correlation is a measure from -1 to +1 relating two prices in a negative, positive, or independent context. Markets with negative correlations can be assumed to move opposite of each other, while positive correlations project that two prices might move in the same direction.
Correlations between two products’ prices fluctuate constantly and can go from positive to negative, or vice versa, in a flash. However, looking at large amounts of data over the course of years can help to paint a broad picture of how commodities relate to major forex pairs.
Gold correlation to forex
Gold has held positive correlations with most major currencies against the US dollar over the years, including AUD, JPY, and GBP. In fact, it could be said that gold has more of a negative correlation to USD than a significantly positive correlation to any particular forex pair.
AUD/USD has, however, shown a proclivity to move with gold prices historically since the commodity is still mined in Australia; thus appreciation in gold prices can lead to Aussie dollar appreciation, and vice versa.
Crude oil correlation to forex
Crude oil is relatively uncorrelated to most major forex pairs – holding an average correlation near 0.0 with the likes of EUR/USD, GBP/USD, and USD/JPY. However, given the commodity’s 6.4% contribution to the Canadian economy,† USD/CAD showed a -0.5 correlation.**
This historical relationship shows that USD/CAD and crude oil tend to move in the opposite direction; that is, movement higher in crude oil’s price can be correlated to appreciation in the Canadian dollar relative to the US dollar.
How to trade forex using commodities
- Choose the forex market with the appropriate commodity correlation
- Open an account to get started, or practice on a demo account
- Choose your forex trading platform
- Open, monitor, and close positions
Trading forex markets using the commodities requires an account with a forex provider like tastyfx. Many traders watch gold and crude oil prices for a divergence from their correlated forex pair, and then buy or sell the forex pair accordingly.
For example, if crude oil prices move higher without much change in USD/CAD, then the forex trader might sell USD/CAD with the idea that Canadian dollar - positively correlated to crude oil - could appreciate against US dollar in the near future based on crude oil's ascent. Correlations, however, do not guarantee a relationship must come to fruition; commodity and forex prices often move independently.
You can help develop your forex trading strategies using resources like tastyfx’s Learn Center. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.
Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.
*tastyfx US is a forex provider that does not provide commodity or stock trading
†Data taken from Canadian Energy Centre 5/26/23
**Correlation values derived from tastyfx forex prices and commodity futures prices sourced from CME Group
This information has been prepared by tastyfx, a trading name of tastyfx LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. tastyfx accepts no responsibility for any use that may be made of these comments and for any consequences that result. See our Summary Conflicts Policy, available on our website.