The Euro/US Dollar has hit a near record-high correlation against gold prices, while the US Dollar/Japanese Yen currency pair has almost completely lost its historically strong link to movements in the S&P 500. The fairly significant shift in correlations underlines important market themes and their implications on likely direction in the US Dollar. Investors drove gold prices to record-highs on fears of extended USD depreciation. At the same time, the US Dollar now holds the dubious honor of carrying the lowest yield of any major world currency—narrowly edging out the Japanese Yen. Whether or not gold prices continue higher can tell us a great deal on global investor sentiment for the recently beleaguered US currency.

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Forex Correlations Update: Euro/US Dollar Very Closely Linked with Gold Prices