Hello Everyone!

Today…we move on to my nemesis…my ex-girlfriend…Gold!

I’m doing OK with it…ever since she ran off with I.M.A. Hedge Fund…you can only cry for so long, right! 

So what is the reason for the fallout with the “Other Woman I Love”?

It was her evil twin brother…his name is Flight to Quality.

( OK OK…I’ll stop with my big soap opera! All of you need to tell me when my animated writing just gets to be too much! )

In all seriousness, Gold is arguably the First Currency of human civilization.

It’s Role in the annals of time are well documented, and will not be considered here. So down to business for our needs here in the Foreign Exchange world.

The correlation between Gold and the Australian Dollar is one of the highest historical correlations that we have in all of Finance.

The correlation has hovered up to a massive 96%…usually averaging around 86% more or less.

We find this correlation primarily as the Aussie Dollar really can be seen as a “Proxy” for Gold, as these first two Captures below illustrate.

(Remember…just as with Oil and the Loonie…consider Gold and the Aussie as two separate Instruments with their own individual characteristics. The Gold/Aussie correlation is even higher, so we really need to be mindful of seeing them on their own merits!)

The great vast land of Australia is the worlds’ third largest producer of Gold, as well as a leading economy for the production of all Metals in this Commodities Complex.

South Africa is the world’s second largest Gold producer…and who is #1?

CHINA! …something my FXStreet Premium South African friend, Boykie, is none too happy about!  

(click once for captures)

We notice a significant “unwinding” in the correlation here the last few months, don’t we?

See how strong Gold is?…how resilient it has remained?

It has simply not continued to slide down to the sea as the Aussie has, but has had plenty of consolidating “Push and Pull” Price action within itself.

This is where our “safe haven” nature comes in…HISTORICALLY, at least! This certainly has not been the “pure” relationship that it appears to be!

Gold has lost more than 20% of its’ value since the March 2008 Highs…so it may not quite be the strong “Safe Haven” we would like it to be.

In its’ most simplistic form…when we see “Fear” as a sentiment racing across the Financial Spectrum, we see see a “Flight to Safety”, or a “Flight to Quality” into Gold as an Asset Class.

We are trying to “hide and preserve” the integrity of our inherent value, so we will convert our Funds into Gold.

Of course, these relationships are deeply complex…but for our needs here, I am trying to be as simple and concise as possible.

Let’s start with a little basic Technical Analysis and see where it may lead us…

( Once again…that Masked Marauder is back who says things do not work! First it was Markets have no Memory, and now Fibonacci Analysis is invalid…OK..we need to get this guy to open his eyes and take off his Mask!…hee hee…  

Onto the 4-Hour, where we can clarify some Triangular Consolidating Patterns.

OK…now the really fun part!

Are you not going to ask me what my Bias is?

Just like my “wife”, Crude Oil…I am Bullish on the ”Pretty Metal Lady” over the long-term.

“Not AGAIN, CVJ!…Bullish again?”

I hear you, I hear you…do not revolt against me just yet!…

Just as with Crude…I will provide a singular Argument for you in defense of my position tomorrow.

In the meantime… I bid “Good Day, Madam!” to Gold.

Her new Beau… I.M.A. Hedge Fund, is sweeping her away for a long weekend.

You guessed it…to Australia.