Gold Gaining vs. Euros
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There has been a significant divergence recently in the spot rate between the gold trading in Euros and gold traded in US dollars. When traded in Euros, gold added 33 Euros since May 21st. Against the USD, the spot rate of gold is virtually unchanged over the same period.
The breakdown signals that investors are choosing both gold and the USD over the EUR. This is significant because it may signal that the sell off in gold vs. USD may have more to do with dollar strength than weakness in the commodity, as investors appear to be bullish on both.
By simultaneously shorting CurrencyShares Euro Trust (NYSE: FXE), an ETF that tracks the spot rate of the EUR/USD, and buying SPDR Gold Shares (NYSE: GLD), spot gold in USD, an investor can be short EUR and long gold.
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The breakdown signals that investors are choosing both gold and the USD over the EUR. This is significant because it may signal that the sell off in gold vs. USD may have more to do with dollar strength than weakness in the commodity, as investors appear to be bullish on both.
By simultaneously shorting CurrencyShares Euro Trust (NYSE: FXE), an ETF that tracks the spot rate of the EUR/USD, and buying SPDR Gold Shares (NYSE: GLD), spot gold in USD, an investor can be short EUR and long gold.
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