Will Gold Euro Rollercoaster Continue?

Will Gold Euro Rollercoaster Continue?

Forex Traders writes: At some point in every tutorial on investing, the relationship between Gold and the U.S. Dollar is referred to as an inverse correlation, meaning that as the value of the Dollar goes down, then an investor would expect the value of Gold to go in the opposite direction. As with any “rule”, there are always exceptions, but if the Fed expands the money supply, it is a safe bet that Gold might appreciate, since it is priced in Dollars on the global market. If you dilute the Dollar’s value, Gold must go up to compensate.

What about Gold’s relationships with other currencies? Currencies come in pairs. If the Euro, for example, strengthens versus the greenback, then you could expect that Gold would be a willing “dance partner” and follow the Euro around the dance floor, so to speak. Uncertainty, however, can spoil this “tango”, and when it is running high in the minds of investors, Gold tends to reach for higher territory, as everyone runs for the hills. When crises hit, capital rushes to safe havens, typically precious metals and treasuries.

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