How did the spot gold price relate to major currencies in 2010 analysis
It's well known that many investors and traders fell back heavily on gold since the recession in the U.S. commenced during 2008. Many still consider gold a safe heaven when uncertainty in major markets rises.
During 2010, there were a couple of new items that most likely only further influenced investors to hold on tight to their gold:
1. The U.S. economy and the continues slash of its currency's worth with the second quantitative easing underway, in which the Fed will buy bonds at 600 billion dollars worth in an attempt to stimulate the economy;
2. Europe's slow down: at the beginning of 2010 Greece was near bankruptcy; later on that year, Ireland was next in line, as the European Union bailed both these countries. Currently, Portugal is in line as a country at risk that could find its self in dire straits. In any case, all these countries needing bailouts, and the slowdown in the rest of the Euro zone only further helps to the descend of the Euro currency.
This news could imply correlation among gold prices and major currencies, as it's a known paradigm that people run away from the US dollar as it weakens to buy gold.
So, how did the spot gold price relate to major currencies?
In the following chart are the correlations among major currencies, WTI crude oil price and spot gold price in 2010. The data are based on monthly percent changes. Since each correlation relies on merely 12 samples (12 months), the results are not too robust; however I think they could be enough to point us to the right direction.
The chart shows that spot gold price wasn't too correlated to most currencies, nor to WTI crude oil.
The only currencies that stand out were USD/ Yuan (Chinese Yuan) with a -0.26, and USD/INR (Indian Rupee) with a -0.18. This means as the Yuan or INR strengthen against the US dollar the spot gold price
