More often than not, the dollar's performance and gold prices is one that typically has an inverse correlation. However, today isn't one of those days. As gold soars higher in eyeing the $4,000 mark next, the dollar is also enjoying a good start to the new week. So, what gives?
A lot of this has to do with political developments elsewhere, weighing on broader market sentiment.
The first big news came over the weekend when Japan voted in its first ever female prime minister. Sanae Takaichi, a fiscal dove, won the LDP leadership election and the news reverberated in the early stages today.
The Japanese yen fell hard with the Nikkei surging to near 5% gains, posting a record close just under 48,000. USD/JPY opened with a gap higher and buyers and making a run above 150.00, which has been a critical level for the pair. In doing so, that is helping to also inadvertently underpin the dollar a little.
And when you couple that with France's one-day old government collapse, it just pours more fuel to the fire as we get into European morning trade. The euro slumped in a drop from 1.1730 to 1.1650-60 levels and flows are favouring the greenback all around now on the session.
French and Japanese bonds are being sold heavily amid the political situations above, and that's also helping to breathe more life into the gold rally that has started running up again in September. The gold bugs have shaken off the $3,500 mark last month and we're now taking aim at the $4,000 mark.
The question now seems more of a when rather than if gold will hit that price level.
