Gold’s Correlation With Stocks And The US Dollar

Gold failed to close above our near-term downtrend line on the 4-hour and are weakening back to the psychological $950/oz area as investors away in the U.S. government’s plan to deal with toxic assets. The correlation between gold and equities is a mess, and it will be interesting to see how the two interact in the near-term.  Regardless, we’re going to stick with the precedent that gold ultimately has a negative correlation with equities.

However, we’re approaching precious metals with a wait and see attitude since America’s use of quantitative easing is changing the layout of the playing field.  That being said, there’s the possibility gold could exhibit a negative correlation with the Dollar as America’s currency loses its status as a safe haven.

Even though the precious metal failed to close above our downtrend, it remains above our 1^st tier uptrend line while hugging the 2^nd tier.  Hence, gold is holding onto its uptrend for the time being even if we witness some more near-term profit taking. Fundamentally we maintain our resistances of $951.43/oz, $955.34/oz, $959.90/oz, and $962.51/oz.

To the downside, hold our supports of $948.17/oz, $945.88/oz, $942.62/oz, and $940.67/oz.   Gold is currently trading at $950.20/oz.

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