This theory can be tested by a quick look at some bank annual reports.
The big Australian banks take surprisingly little open risk in the gold market. They offer gold swaps as part of their range of customer products and have considerable client positions, but the risk is mostly backed into the futures market or swaps with the big commodity trading houses.
If you dig into the annual reports of the banks and look at the VaR (market risk) attribution, gold is usually lumbed into commodities, and that is usually 2/10th of nothing relative to interest rates and FX.
Afterthought: If you look at APRA's APS 113(Standard Method), you may notice that the regulator requires banks to treat gold positions in the same way as currency positions. This always seemed reasonable to me. If you think about gold price movements in this context of the FX markets, they may start to make more sense ....
