, IncFebruary 15, 2010 – Reacting to continued concerns over the lack of European assistance for Greece, both the US dollar and gold prices have been rising today as concerns for European Union policy towards the Greek financial crisis are pushing risk aversion higher for the euro and moving investors to both the dollar and gold.
Gold prices have hovered near the $1,100.00 per ounce price throughout the morning trading after going over the key mark in early morning trading. At noon EST, the US Dollar Index was also higher, trading at 80.33, up 0.116. "Investors seem to be partly offloading euro-zone risk equally in gold and the U.S. dollar," said Pradeep Unni, senior analyst at Richcomm Global Services. "This is specifically the reason why gold is firm despite the greenback also being strong.
While both commodities are currently tracking upward, some analysts see that as only temporary. Unni added, "Past data suggest that this decoupling phenomenon is more of a temporary development and (gold and the dollar) will switch to their inverse correlations in a short time frame."
The turn against the euro appears to be directly related to a hesitancy by EU leaders to commit to a plan of action ahead of planned budget deficit cuts by the Greeks. "Traders and investors will be looking for further expansion on the EU's "support" for Greece's debt problems, with the generally negative outlook for the PIIGS (Portugal, Italy, Ireland, Greece and Spain) likely to further question the cohesion and direction of the euro," said TheBullionDesk.com analyst James Moore.
While gold and the dollar typically have an inverse relationship, the reluctance of the EU leaders to commit to a plan of action may create a continued decoupling. The euro has been trading nearly its nine-month low while both dollar values and gold prices rise, suggesting continued gains for both in the absence of a plan from Europe.
Ronald Stevens
Senior Staff Writer - GoldPrice.net
