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US Dollar-Gold Correlations Still Strong Despite Gold Volatility, Looks to Europe

US Dollar-Gold Correlations Still Strong Despite Gold Volatility, Looks to Europe

2011-09-12 02:36:00
David Liu, Technical Strategist
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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

0.43

-0.34

-0.14

-0.54

-0.19

0.55

0.62

1 Week 60 Min

0.29

-0.30

-0.02

0.20

0.58

-0.42

-0.59

2 Week 60 Min

-0.63

0.53

0.48

0.41

-0.13

-0.25

-0.07

1 Month Daily

0.42

0.19

-0.12

-0.44

-0.39

0.23

0.40

Last week’s commentary can be found here.

Weekly Commentary: Although shorter term correlations between the price of gold and the strength of the US dollar weakened this week, most of the divergence between the two assets was due to the volatility of gold versus the US dollar as investors continued to seek haven. At the time of writing, the CBOE’s gold volatility index stands at 37.58, the highest since March 2009. Longer term correlations, however, still show strengthening ties between dollar and gold demand – both as havens – against risk currencies including the Australian dollar and the Euro.

With the Swiss National Bank pegging the Franc at EURCHF 1.2000, most European safe haven flows out of the Eurozone are seen to go into dollars and gold. Additionally, with the global economic recovery slowdown, rumors once again arose this week that Greece is nearing default despite ECB and Eurozone packages to keep the nation solvent. Continued debate between the EU-17 nations about possible Eurobonds – and with Germany strongly opposed to the plan – has led to the top German official in the ECB Jürgen Stark to unexpectedly quit the ECB board, adding uncertainty in Germany’s role in any future assistance towards Greece.

Gold-Forex_Correlations_09122011_US_Dollar-Gold_Correlations_Still_Strong_As_Market_Takes_Breather_body_Picture_2.png, US Dollar-Gold Correlations Still Strong Despite Gold Volatility, Looks to EuropeGold-Forex_Correlations_09122011_US_Dollar-Gold_Correlations_Still_Strong_As_Market_Takes_Breather_body_Picture_1.png, US Dollar-Gold Correlations Still Strong Despite Gold Volatility, Looks to Europe

Written by David Liu, DailyFX Research

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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