Red-Hot Resources

"Luck is not chance, it’s toil; fortune’s expensive smile is earned.”

Wednesday, April 23, 2008

Gold, the Euro and the US Dollar

Following up on a question from the Red-Hot Commodity ETFs webinar yesterday -- the question about the relationship between gold, the US dollar and the euro -- take a look at this weekly chart ...You can see that gold was moving WITH the euro right up until last month, when the two suddenly started to diverge. You can see the gold-euro divergence a bit better on a daily chart ...Why is this happening? I've asked two currency traders this morning and neither of them knew. Now THAT'S scary. One of them told me: "I hope gold is leading the euro lower, because I have euro puts."

So to recap -- for quite some time, gold has been moving closely aligned with the euro and against the dollar. In the last month, there has been a disconnect -- the euro is going up but gold isn't joining in the rally. Why is this happening and what does it mean for the longer term? This is the question we must ponder now.

Labels: ,

Check out my new gold and energy blog at