The following table includes the correlation between gold and the most popular currency pairs over various timeframes. A value close to +1 indicates a strong positive relationship between gold and the pair, while a value close to -1 indicates a strong negative relationship. Colored values indicate week-to-week changes of over 30%.

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Gold-Forex Correlations for the previous week can be foundhere.

Weekly Commentary: As markets continue to monitor the European situation aslast week’s summitfailed to result in any immediate relief for the troubled European nations, important calendar events for the US dollar may contribute to further gold weakness as gold remains inversely correlated to dollar strength. Gold’s stronger correlation with riskier currencies is now in its 6th week, continuing to suggest that demand for US dollars as a haven rather than gold remains elevated. Further uncertainty about Europe could result in further sales of the yellow metal for liquid US dollars.

Gold’s inverse correlation with theUS dollar could be tested once again later this week at the Federal Reserve’s Open Market Committee rate decision and subsequent press conference. Although credit risk emanating from Europe remains high, the US has experienced a strong of better than expected economic indicators including employment, production and consumer spending. This may reduce the chance of additional asset purchases from the Fed, which will hurt the strength of gold as the central bank could show unwillingness to provide additional liquidity to a recovering economy to prevent stoking inflation pressures.

Further Reading:Gold’s Outlook Rests on the Euro-zone and…the Swiss National Bank?

Written by DavidLiu,DailyFX Research