US Dollar, Gold and Silver Price Analysis: Asset Correlation

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US Dollar, Gold and Silver Price Analysis and News

  • Abundant liquidity with high inter-asset correlations
  • Silver in the Roaring Twenties, Gold Set to Hit an All-Time High
  • Continuation of the trend in cross assets as volatility declines

Abundant liquidity with high inter-asset correlations

While liquidity stemming from monetary and fiscal policy remains abundant, correlations between assets are high, which has been highlighted in particular by the strong and ongoing relationship between equity and foreign exchange markets. As market volatility wanes, high-beta currencies have followed the rally in equities, which has largely been at the expense of the US dollar. As we pointed out yesterday, the negative relationship between the US dollar and equities is the strongest in several years. Simply put, the longer the stock markets go up, the longer the downtrend for the greenback.

Silver in the Roaring Twenties, Gold Set to Hit an All-Time High

The precious metals complex continued to strengthen with a significant rally seen for silver, having hit $23, with gold eyeing $1900. Although the weakness in the greenback has helped the precious metals complex, we still believe that the the dominant driver was falling real yields (now at 8-year lows), which is further underlined by a strong relationship between real yields and precious metals.

Real Yields Push Precious Metals Higher

Source: DailyFX

Continuation of the trend in cross assets as volatility declines

A relatively quiet affair for today’s session given the lack of key economic data. So while rising tensions between the US and China have caused small bouts of volatility, the lack of material escalation will likely see the cross assets maintain their current trend. Elsewhere, the EU and UK will take stock of the latest round of trade talks. However, with UK press reports reporting that the talks are at an impasse, we expect the rhetoric to remain pessimistic. However, this has yet to deter the British pound, which is trading well against the USD, having hovered above 1.27 and thus keeping resistance at 1.2812 at the point. That said, we struggle to see GBP/USD move firmly above 1.2800 unless tangible progress in trade talks has been made.

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