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Gold-FOREX Correlations Misleading on Gold Liqudation for US Dollars

Gold-FOREX Correlations Misleading on Gold Liqudation for US Dollars

2011-09-26 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%.

---------------------------------------------------------------------------------------------------------------------------------

Gold

USD/CAD

AUD/USD

NZD/USD

EUR/USD

GBP/USD

USD/JPY

USD/CHF

3 Day 15 Min

-0.76

0.74

0.80

0.57

0.43

-0.06

-0.50

1 Week 60 Min

-0.80

0.79

0.82

0.70

0.64

0.12

-0.64

2 Week 60 Min

0.02

-0.20

-0.29

-0.02

-0.07

0.64

-0.17

1 Month Daily

-0.73

0.79

0.76

0.47

0.59

0.51

-0.52

Last week’s commentary can be found here.

Weekly Commentary: With the Greek debt crisis back in focus, investors continue to look for safer assets to protect their wealth. Despite misleading change from last week to this week which shows the correlation between gold and riskier currencies rise, much of the shift was due to an overwhelming market demand for US dollars as the Federal Reserve’s “Operation Twist” failed to quell market fears and inject additional liquidity.

Furthermore, the heavy selling of the haven metal can be interpreted as a shift by large banks and traders towards a more liquid haven – the US dollar to protect their balances and reserves. The drop in Friday’s market was also exacerbated by a move by COMEX, raising gold margins 21.5% and silver margins 15.6% to discourage speculator trading and volatility. In the aftermath of Friday’s price action, traders will continue to look for safe haven assets as Greek debt problems continue unresolved.

Gold-Forex_Correlations_09262011_Gold-Forex-Liquidate-Dollars_body_Picture_1.png, Gold-FOREX Correlations Misleading on Gold Liqudation for US DollarsGold-Forex_Correlations_09262011_Gold-Forex-Liquidate-Dollars_body_Picture_2.png, Gold-FOREX Correlations Misleading on Gold Liqudation for US Dollars

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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