Euro to fall further and Gold breaks traditional relationship with dollar

The devaluation of the euro in recent months, which has continued in spite of huge political attempts to reverse the trend, has recently accelerated.

The Euro value against the USD (US dollar) has nosedived. The 30, 90 and 200 weekly averages have been falling steeply. Something known as a ‘golden cross’ has formed, whereby the 30 and 90 weekly averages have fallen through the 200 weekly average.

Click here to see a larger version

A ‘golden cross’ is a bearish sign which could spell further falls ahead for the euro (If you’re uncertain of what these moving averages are don’t worry, we’ll write an article on these soon).

As confidence in the euro continues to erode, gold prices today find themselves at record highs for the euro, pounds sterling (GBP) and US dollars.

The dollar and gold relationship changes

Whilst new records are being reached for gold priced in US dollars the dollar too has seen an improvement over the year.

This week saw the gold futures up more than 15 percent on a year to date basis, and the dollar index up 10 percent, the long term ‘Inverse dollar gold relationship‘ is being discarded. Gold has been rising in tandem with the dollar for the past few months.

The US dollar and gold are still being sought as safe haven assets, and as such they have grown as the economic instability has fed the growth of investors fears.

Notably the stock market has also been climbing in recent weeks. As the stock market continues to post gains the underlying gold prices really reflect investors sentiment. The high gold prices reflect peoples fear about a double dip recession or at least a correction. This will only become greater as the stock market goes higher.

The rise of the US dollar and gold together is based on the need for capital to find safety. What we should not forget is that although the stock markets are rising this does not indicate stability in currencies and economies. Despite the apparent safe haven of the US dollar, there can only be one conclusion. It will have its day of reckoning, it’s just a question of when.

Important

Information in Gold Price Today is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Appropriate independent advice should be obtained before making any such decision.