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12/18/2009

Gold Price and Currency Correlations

This article appeared in the November 2009 issue of Foreign Exchange Consensus Forecasts.

Key Concepts: Gold Price | Currency Correlations |

Key Economies: Gold | Foreign Currencies |

Sharp Rise in the Price of Gold

Gold, which some would call the original currency, has been much in the headlines after soaring above US$1000/troy ounce in September. India bought 200 tons of the precious metal last month, as part of efforts to diversify its FX reserves. Yet, unlike equities and most other tradeable securities, gold does not provide a yield and, in real terms, its value is lower than its peak in the early 1980s. As a matter of general interest we present our analysis on the relationship between gold prices and a select number of currencies. The Correlation Calculations table right were made using daily data over the period from April 1, 2009 to September 30, 2009. To provide a longer term historical perspective, we also calculated correlations using monthly data for the period from January 1996 to September 2009. The Correlation Coefficients indicate the degree to which a particular currency and gold prices move together, with positive values of close to one (1.00) indicating that they move very closely together and values of close to minus one indicating that they generally move in opposite directions. Values close to zero show that there is little or no relationship.

Correlations Analysis: Gold and Currencies

Gold Prices & US Dollar Index (NYBOT)
Correlation between gold prices and US dollar
Largest Gold Reserves, Sep. 2009 in Tons
Gold Reserves

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