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DailyFX Home / Forex Market News / Weekly Columns / Gold-Forex Correlations

Gold-Dollar Correlations Mixed as Investors Choose Liquid Dollars Over Gold

By David Liu
19 September 2011 02:36 GMT

The following table includes the correlation between gold and the most popular currency pairs over various timeframes. A value close to +1 indicates a strong positive relationship between gold and the pair, while a value close to -1 indicates a strong negative relationship. Colored values indicate week-to-week changes of over 30%.

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Gold

USD/CAD

AUD/USD

NZD/USD

EUR/USD

GBP/USD

USD/JPY

USD/CHF

3 Day 15 Min

0.58

-0.78

-0.58

-0.81

-0.56

0.14

0.75

1 Week 60 Min

0.64

-0.37

-0.56

-0.84

-0.01

0.42

0.80

2 Week 60 Min

0.39

-0.24

0.62

0.10

-0.76

-0.62

-0.07

1 Month Daily

0.36

0.14

-0.02

-0.12

0.00

0.10

-0.09

Last week’s commentary can be found here.

Weekly Commentary: Despite the ongoing debt crisis in Europe and the possibility of a Greek default as a newly found budget hole hurts its eligibility for the October tranche, longer term correlations between the US dollar and gold as proxies for safety have been tapering off. Although weekly correlations are still relatively strong, the change seems to be more risk-selling related.

The weakening correlations between major risk pairs and gold can be interpreted as a much stronger demand for the greenback as banks shift capital towards a more liquid safe asset. Earlier this week, central banks collectively intervened in the currency markets by providing enough dollars to quench the market’s demand. Traders this week will be closely monitoring any further developments in Greece and the Eurozone, but will also be following Wednesday’s FOMC rate decision at 1815GMT for any hint of additional easing by the bank.

Gold-Forex_Correlations_09192011_Dollar-Gold_Correlations_Mixed_on_Dollar_Demand_body_Picture_1.png, Gold-Dollar Correlations Mixed as Investors Choose Liquid Dollars Over Gold

Gold-Forex_Correlations_09192011_Dollar-Gold_Correlations_Mixed_on_Dollar_Demand_body_Picture_2.png, Gold-Dollar Correlations Mixed as Investors Choose Liquid Dollars Over Gold

Gold-Forex_Correlations_09192011_Dollar-Gold_Correlations_Mixed_on_Dollar_Demand_body_Picture_3.png, Gold-Dollar Correlations Mixed as Investors Choose Liquid Dollars Over Gold

Written by David Liu, DailyFX Research

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19 September 2011 02:36 GMT