The Symbiosis between EUR/USD and Gold

ForexNewsNow | Published on September 18, 2011 at 5:17 am

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ForexNewsNow – The fluctuation in the price of an ounce of gold this past week were closely linked to the ups and downs of the most traded currency pair, the EUR/USD, and show just how well the values of each financial asset impact each other’s pricing.

As doubts on the stability of the euro zone reached new heights last week over concerns about a Greek default, the euro stabilized around 1.3700 before gaining further ground against the greenback and closing the trading week at around 1.3800. Political events had a direct impact on the financial markets as the meeting of EU financial officials in Poland showed.

Here is an analysis of the symbiosis between XAU/USD and EUR/USD during this past week.

Monday, Sept. 12 :

The EUR/USD pair experienced serious turbulence on Monday, due to the viral uncertainty in the markets. The higher the doubts on EU stability, the quicker investors rush towards safe havens such as gold. Conversely, as soon as the euro regains strength, interest in gold wanes.

Tuesday, Sept. 13 :

Despite the euro’s stabilizing around 1.3700, XAU/USD increased in value. Analysts were anticipating a decrease in the value of the euro. Thus, we can see that the XAU/USD is an excellent indicator of investor confidence in the EU’s single currency.

Wednesday, Sept. 14:

The euro gained ground against the dollar on Wednesday, moving above 1.3750. And as an immediate consequence, gold started losing value.

Thursday, Sept. 15:

The EU central banks meeting in Poland allowed the EU to reassure investors somewhat about the stability of the euro zone. Following these announcements, the euro sharply increased against the US dollar and gold lost ground in relative terms.

Friday, Sept. 16:

Doubt came back to the euro zone slightly weakening the EU’s single currency against the greenback, allowing gold to recover from its losses on Thursday. US Treasury Secretary Timothy Geithner’s comments on the euro debt crisis also showed that the cooperation between the US and the EU may also impact forex and gold markets.

Overall, this past week underlined how the values of EUR/USD and XAU/USD are linked one to another. This relationship can both elucidate how weak the euro is against the dollar and help anticipate investors’ propensity to flee to safe haven assets.

The upward trend in Gold that we have been observing for months now testifies to the lack of confidence in both the euro and US dollar. More than a classic safe haven, gold has become a serious indicator of market sentiment and investor confidence.

 

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