Gold Continues to Rise with Risk as Dollar Weakens on Europe

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-Forex Correlations for the previous week can be found here.

Weekly Commentary: Gold-FOREX correlations for the past week remained relatively unchanged, with gold prices maintaining a tight correlation with risk currencies, especially yield currencies the Australian and New Zealand dollars. As markets continue to buy into risky assets including equities, gold continues to be driven by its inverse dollar status. Even though newer data are showing economic improvement in the US, markets continue to sell dollars on the Federal Reserve’s promise to keep rates low for an extended amount of time.

The economic docket for the rest of the week is relatively quiet for the US, except for January CPI on Friday. Overall headline CPI, including food and energy, is expected to grow slower, falling to 2.8% versus 3.0%. As inflationary pressure decline, markets may expect the Fed to keep its promise. Additionally with Monday’s passage of the next set of Greek austerity and budget reforms, risk could continue to drop, helping both risk currencies and gold according to current correlations.

-- Written by David Liu, DailyFX Research