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Gold-FOREX Correlations Tracks Tighter as US Yields Drive Both Markets

Gold-FOREX Correlations Tracks Tighter as US Yields Drive Both Markets

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

-0.20

0.72

0.74

0.68

0.68

0.07

-0.71

1 Week 60 Min

-0.42

0.68

0.72

0.40

0.64

0.14

-0.37

2 Week 60 Min

-0.91

0.94

0.88

0.90

0.80

-0.67

-0.91

1 Month Daily

0.20

0.80

0.82

0.74

0.14

-0.82

-0.73

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

Weekly Commentary: With data last week showing that the US-led recovery may not be as quick as previously thought, expectations for Federal Reserve tightening and overall risk sentiment faded, pressuring US yields lower from its multi-month highs. As the focus further shifted away from sovereign debt problems to recovery, US treasury yields continued to drive both gold and FX markets.

US data is expected to drive price movements for both gold and FX markets this week, with consumer confidence, durable goods and tertiary GDP revisions for the fourth quarter on tap. With expectations relatively flat, overall market sentiment may continue with last week’s trajectory. Although sentiment remains relatively unclear without major fundamental drivers, the drift lower in US yields from last week could result in higher gold prices and fund additional market shifts towards higher yielding currencies and assets.

Gold-Forex_Correlations_03262012_Correlations_Tracks_Tighter_as_US_Yields_Drive_Both_Markets_body_Picture_5.png, Gold-FOREX Correlations Tracks Tighter as US Yields Drive Both MarketsGold-Forex_Correlations_03262012_Correlations_Tracks_Tighter_as_US_Yields_Drive_Both_Markets_body_Picture_6.png, Gold-FOREX Correlations Tracks Tighter as US Yields Drive Both MarketsGold-Forex_Correlations_03262012_Correlations_Tracks_Tighter_as_US_Yields_Drive_Both_Markets_body_Picture_1.png, Gold-FOREX Correlations Tracks Tighter as US Yields Drive Both MarketsGold-Forex_Correlations_03262012_Correlations_Tracks_Tighter_as_US_Yields_Drive_Both_Markets_body_Picture_2.png, Gold-FOREX Correlations Tracks Tighter as US Yields Drive Both MarketsGold-Forex_Correlations_03262012_Correlations_Tracks_Tighter_as_US_Yields_Drive_Both_Markets_body_Picture_3.png, Gold-FOREX Correlations Tracks Tighter as US Yields Drive Both MarketsGold-Forex_Correlations_03262012_Correlations_Tracks_Tighter_as_US_Yields_Drive_Both_Markets_body_Picture_4.png, Gold-FOREX Correlations Tracks Tighter as US Yields Drive Both Markets

-- 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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