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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

-0.94

0.91

0.90

0.91

0.94

-0.85

-0.91

1 Week 60 Min

-0.46

0.18

0.44

-0.07

0.62

-0.92

-0.94

2 Week 60 Min

-0.36

0.12

0.24

0.05

-0.24

-0.41

0.44

1 Month Daily

-0.26

0.18

0.32

-0.66

0.12

0.50

-0.52

Weekly Commentary: Short term correlations with gold and dollar pairs rose to the highest in recent history as Moody’s threatened to downgrade US government treasury pending the ongoing debt scuffle in the House of Representatives. The fear that the safest asset in the world may lose its status hurt the dollar on all sides as investors flocked to both foreign currencies and precious metals.

For more about the debt ceiling and what it means for the dollar, please refer to this analysis.

On a longer term outlook, the Japanese yen and Swiss franc gained in tandem with the yellow metal, showing increased safe haven demand. Fundamental problems this week ranging from a possible contagion of the European debt crisis to Italy to the possible US debt downgrade induced further flights to safety. Despite the record flows, markets are looking forward to second quarter earnings next week and a possible conclusion to the debt fight.

Gold-Forex_Correlations_07152011_body_Picture_1.png, Gold and Currencies Correlations at Record on US Dollar RiskGold-Forex_Correlations_07152011_body_Picture_2.png, Gold and Currencies Correlations at Record on US Dollar Risk

Please note: Chart uses franc rate as CHFUSD to show safety correlation with gold.

Gold-Forex_Correlations_07152011_body_Picture_3.png, Gold and Currencies Correlations at Record on US Dollar RiskGold-Forex_Correlations_07152011_body_Picture_4.png, Gold and Currencies Correlations at Record on US Dollar Risk

Written by David Liu, DailyFX Research