Weaker Gold Price May Point to Overvalued Euro

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It's been quite some rally for the euro, scorching its way to $1.60 against a beleaguered dollar last month, but if recent moves in gold are anything to go by it might just be time to sell.

It's been quite some rally for the euro, scorching its way to $1.60 against a beleaguered dollar last month, but if recent moves in gold are anything to go by it might just be time to sell.

Bullion has broken ranks with its commodity stable-mates to plumb four-month lows last week, shedding almost $200 after hitting a record $1,030.80 an ounce in mid-March .

Traditionally the greenback's inverse relationship with the precious metal goes thus: if the dollar falls, gold rises as the weaker U.S. currency makes bullion cheaper for non-U.S. investors and vice versa...

Trade between the euro and dollar accounts for some 27 percent of $3.2 trillion-a-day global foreign exchange turnover and the euro/dollar-gold absolute correlation is among the strongest -- averaging 94 percent since the start of 2007.

So it's hardly surprising that bullion's record high was attributed in part to a then record high in euro/dollar the same day...

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