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%.


3 Day 15 Min-0.310.530.450.550.580.25-0.06
1 Week 60 Min0.25-0.15-0.370.040.17-0.340.09
2 Week 60 Min0.81-0.85-0.65-0.89-0.88-0.220.87
1 Month Daily-0.470.610.440.450.720.42-0.64

Last week's commentary can be found here.

Weekly Commentary: While markets digested news last week of a possible referendum in Greece on continued austerity and its membership in the Eurozone, and the possibility of further Italian budget problems as the G20 meeting revealed possible IMF oversight for the country, mild short term volatility drove traders towards US dollar and gold havens. Even though short term correlations between gold and the dollar have increased, longer term correlations have remained decidedly unchanged as gold remains anti-dollar. This pattern of increased safe haven flows towards the US dollar during times of heavy volatility may continue to be sustained as FOMC Chairman Ben Bernanke offered no clear signals of additional easing by the central bank this week.

Gold-dollar correlations may continue to increase this week on a shorter term basis as Chinese data including CPI, industrial production and trade highlight the calendar. Although inflation, the key data is expected weaker, the central government may not halt their efforts to reign in prices by restricting the domestic economy. Additionally, expected weaker data in industrial production and retail spending could cut into investor sentiment, driving up both the US dollar and gold in the short term.

Despite events on the Asian docket, traders will continue to closely monitor events in Europe. Although the Euro was seen to be bid higher in early Monday trading as Greek Prime Minister George Papandreou stepped down to form a unity government between his PASOK party and the main opposition New Democracy, higher appetite was sapped away as the spotlight turned to developments in Italy. With current Prime Minister Silvio Berlusconi seeing increasing defections in his party and calls for his resignation, Monday's 2010 Budget Report vote may be an early look into his remaining power in government.

Also: Gold To Advance Further As Fed Dampens Demands For USD


Written by David Liu, DailyFX Research