Good day forex traders.
Today let us take a look at the possibility of a correlation between the forex currency pair EUR/USD and the price of Gold. To make money in forex, we need every possible indicator for analysis. The gold price is one of them.
Looking at a comparison of the EUR/USD chart and Gold price chart above since the beginning of 2012, we note a few interesting points.
Circled in red were periods where a significant correlation failed to exist. For example while the EUR/USD is rallying now due to an increase in positive sentiment, the gold price remains flat. While this could be due to a sell off of gold as a result of risk taking activities, a corresponding dip will strengthen the inverse correlation idea.
Circled in black were periods where a significant correlation exists. In this instance, the theme of the price movements were probably due to the weakening and strengthening of the US Dollar.
In conclusion, the correlation of the EUR/USD and Gold price will not be applicable for immediate interpretation. Rather it is more suitable to be used for analysis on the market pulse such as risk taking or risk aversion.
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