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Gold-Risk Correlations Weaken as Metal Poised to Reclaim Haven Status

Gold-Risk Correlations Weaken as Metal Poised to Reclaim Haven Status

2011-10-17 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

-0.62

0.29

0.41

0.46

0.28

0.69

-0.55

1 Week 60 Min

-0.58

0.48

0.52

0.53

0.46

0.61

-0.60

2 Week 60 Min

-0.34

0.35

0.38

0.52

0.54

-0.61

-0.47

1 Month Daily

-0.85

0.68

0.84

0.49

0.36

-0.28

-0.66

Last week’s commentary can be found here.

Weekly Commentary: The yellow metal was caught between its newly found reverse-US dollar status and safe haven status during the last week as equity markets and risk currencies trended upwards after a week of heavy selling. As sentiment improved in the last 5 sessions, traders sold dollar and gold holdings in anticipation of last Friday’s G20 meeting and the continuation of Q3 earnings into this week.

Price action this week for both gold and the dollar’s safe haven components will continue to be guided by debt crisis developments in Europe and US earnings. Traders will be focusing on key financials including Wells Fargo and Citibank on Monday, and Bank of America and Goldman Sachs on Tuesday. US equity and Canadian dollar pairs traders will also be watching earnings from key US domestic components, with machine tools manufacturer Stanley Black & Decker on Monday and WW Grainger and transportation conglomerate CSX on Tuesday.

Despite earnings expectations leading US markets this week, currencies traders will also keep in mind any further developments in the European debt crisis. Although this weekend’s G20 meeting failed to result in a comprehensive plan for the problem, expectations that any Greek fallout will be contained may buoy the Euro. This could cut demand for safe haven assets, but gold’s current correlation with risk may continue to hold through this week.

Fundamental Forecast: Gold Eyes G20 Meetings In Paris for Direction

Gold-Forex_Correlations_10172011_Gold-Risk_Correlations_Weaken_as_Metal_Poised_to_Reclaim_Haven_Status.doc_body_Picture_1.png, Gold-Risk Correlations Weaken as Metal Poised to Reclaim Haven StatusGold-Forex_Correlations_10172011_Gold-Risk_Correlations_Weaken_as_Metal_Poised_to_Reclaim_Haven_Status.doc_body_Picture_2.png, Gold-Risk Correlations Weaken as Metal Poised to Reclaim Haven StatusGold-Forex_Correlations_10172011_Gold-Risk_Correlations_Weaken_as_Metal_Poised_to_Reclaim_Haven_Status.doc_body_Picture_3.png, Gold-Risk Correlations Weaken as Metal Poised to Reclaim Haven StatusGold-Forex_Correlations_10172011_Gold-Risk_Correlations_Weaken_as_Metal_Poised_to_Reclaim_Haven_Status.doc_body_Picture_4.png, Gold-Risk Correlations Weaken as Metal Poised to Reclaim Haven Status

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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