There are certain countries whose GDP highly depends on some key commodities, such as Russia and Canada with oil, or Australia and New Zealand with Gold.

This means that when one of these commodities experiences a significant price appreciation or depreciation, the currency of the corresponding country usually follows with it. It is important to remember that the movements in commodity prices does not always reflect the direction that high correlating currencies will move. Commodities have their own set of risks as do country-specific countries, such as political risks for example.

Correlation between Gold and the Australian Dollar

On the chart to the left, we look at the correlation between Gold and the Australian Dollar. It is important to take the pricing in consideration. In other words, both should be compared to the US Dollar in order to make a direct comparison between the two asset classes (XAU/USD vs AUD/USD). Here, we can see how a country whose GDP is highly dependent on the price of key commodities (Gold) given the close correlation between the price of gold and the Australian currency.

Correlation between Brent Crude Oil and the Canadian Dollar

Again, as evident on the chart to the left, we look at the correlation between Brent Crude Oil and the Canadian Dollar (remember that the pricing should be the same, both have to be priced in US Dollar). Here, we can see how fierce the decrease in the Brent Crude Oil price has severely impacted the Canadian Dollar, as the Canadian GDP heavily relies on the Brent Crude Oil price.

Who are we?

Caveat Capital Management is a strategic advisory firm based in Cape Town. Caveat Capital Management specializes in structuring tailor-made investment portfolios that serve your needs now and grow with you as your needs change. Caveat works to maximize your gains and minimize the risk.

What we offer

Caveat Capital Management has a competitive fee structure that incentivizes the portfolio manager to perform and the renumeration is highly linked to the performance of the portfolio. Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA). This means that we have to required licensing to structure full-discretionary portfolios structured to your needs.

Disclaimer

This weekly report does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business.

Contact Information

Main Office

Spaces A1, Kinetic Way Extension, Bridgeway, Century City Cape Town, 7441

Phone

Office: +27 (0)21 830 5777

EMAIL

General enquiries: info@caveat.co.za

Portfolio Management: FrancoisCaveat@protonmail.com

Website: www.caveat.co.za

Information and content

The information in and content of this publication are provided by Caveat Capital Management as general information about the company and its products and services. Caveat Capital Management does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to, nor does it constitute financial, tax, legal, investment or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication constitutes a solicitation, recommendation, endorsement or offer by Caveat Capital Management, but is merely an invitation to do business. 

Caveat Capital Management has taken and will continue to take care that all information provided, in so far as this is under its control, is true and correct. However, Caveat Capital Management shall not be responsible for and therefore disclaims any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered as a result of or which may be attributable, directly or indirectly, to the use of or reliance upon any information provided. Past performance is not an indication of future performance. Caveat Capital Management does not provide any guarantee regarding capital or performance. 

Caveat Capital MGMT (Pty) Ltd is a CATII – Authorized Financial Services Provider (FSP no. 24777) registered at the South African Financial Services Conduct Authority (FSCA). 

Author: Francois Nel, BCom (US)