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Gold-FOREX Correlations Torn Between US Yields, Fed Expectations; Yen Strongly Mirrored

Gold-FOREX Correlations Torn Between US Yields, Fed Expectations; Yen Strongly Mirrored

David Liu, Technical Strategist

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

-0.48

0.30

0.42

0.25

0.31

-0.41

-0.34

1 Week 60 Min

-0.32

0.17

0.34

0.46

-0.40

-0.93

-0.56

2 Week 60 Min

-0.31

-0.68

-0.68

-0.65

-0.68

-0.21

0.66

1 Month Daily

0.46

0.69

0.76

0.78

0.24

-0.74

-0.77

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

Weekly Commentary: As yields on US treasuries reached multi-months highs in the past week following a less dovish fed, investors sold non-yielding assets against the US dollar, including dollar and yen. Further expectations buoyed by better data coming out of the United States, signaling a possible US-led recovery, contributed to selling of other currencies including the Euro and British Pound. As cross-market correlations shift from being risk-driven to rates driven, gold’s correlations with other zero or low yielding currencies are expected to continue.

Despite a lack of major data on the US docket for this week, traders will be looking forward to scheduled speeches by members of the FOMC, including Chairman Bernanke, New York Fed President Bill Dudley and Chicago Fed President Charles Evans. As gold is still largely driven by its anti-dollar status, signals that the Fed will try to control the rally in US yields may be the main driver for this week for both the Greenback and the precious metal.

Gold-Forex_Correlations_03192012_Gold-torn-between-yields-commentary_body_x0000_i1029.png, Gold-FOREX Correlations Torn Between US Yields, Fed Expectations; Yen Strongly MirroredGold-Forex_Correlations_03192012_Gold-torn-between-yields-commentary_body_Picture_1.png, Gold-FOREX Correlations Torn Between US Yields, Fed Expectations; Yen Strongly MirroredGold-Forex_Correlations_03192012_Gold-torn-between-yields-commentary_body_Picture_2.png, Gold-FOREX Correlations Torn Between US Yields, Fed Expectations; Yen Strongly MirroredGold-Forex_Correlations_03192012_Gold-torn-between-yields-commentary_body_Picture_3.png, Gold-FOREX Correlations Torn Between US Yields, Fed Expectations; Yen Strongly MirroredGold-Forex_Correlations_03192012_Gold-torn-between-yields-commentary_body_Picture_4.png, Gold-FOREX Correlations Torn Between US Yields, Fed Expectations; Yen Strongly Mirrored

-- 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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