Gold Prices drifted lower early in London on Tuesday, nearing the return of US dealing from the Independence Day holiday below $1206 an ounce.
Government bonds also slipped as European stock markets rose sharply to reclaim one-third of last week's 5% drop.
Silver Bullion was little changed above $17.80 an ounce, but crude oil crept back above $73 per barrel and the broad CRB commodities index added 0.5%.
The CRB commodities-market index currently shows a strong, positive correlation of +0.73 with New York's S&P500 equity index, according to today's chart-of-the-day from Bloomberg News.
It would read +1.0 if thy moved perfectly in lock-step together, and is "rather spectacular" says one London Gold Dealer in a note, "given that commodities were long considered a hedge against volatility in equity markets."
"Gold is performing right now very much against what is happening in the wider commodity space," noted UBS precious-metals strategist Edel Tully in a recent client conference call. "In many ways you need to exclude gold when you're looking at the correlation between equities and commodities in general."
Reporting "increased interest" amongst UBS's institutional clients for diversifying their portfolios via a 5-10% allocation to gold, "Typically Gold has performed negatively to equity markets," Dr.Tully continued. "Certainly in the current situation, gold is the 'anti-equity' market...
"If [the current] de-risking appetite remains, gold will continue to gain ground."
Comparing gold against the major currencies, "The relationship between Gold and the Dollar has been very frenetic of late," says RBC Capital analyst Daniel Major, speaking to Reuters today.
"Particularly in the last week, you saw a $20 fall in gold on a day when the currencies were supportive. [But] in the short term, the intraday chart of the Euro-Dollar versus gold is tracking perfectly."
Gold ended June showing its strongest daily correlation with the Euro-Dollar exchange rate of the whole second quarter, according to BullionVault analysis.
Rising from a record negative reading of minus 0.92, hit on May 18th, gold's correlation with the single currency recovered its strongly positive 10-year average of 0.53 last week.
Looking ahead, "ECB President Trichet argued over the weekend that fiscal consolidation won't choke growth," writes Steve Barrow, chief currency strategist at South Africa's $21-billion Standard Bank.
"In our view that's only possible if interest rates fall significantly. But as this cannot happen [because the ECB has already slashed rates to 1.0%] the Euro has to shoulder the burden of monetary easing, by falling.
"It's clearly hard to say how far the Euro has to fall to compensate in the same way as sharp interest rate declines did in the 1990s. But our best guess is that it's not $1.25 or £0.83...We suspect it is at least 20% lower than these levels."
Back in the bullion market, "We think Gold is a little too high," said Manpreet Gill, Asia strategist at Barclays Wealth, in a Bloomberg interview on Monday.
"[The Gold Price] is not justified by the fundamentals, but driven more by a knee-jerk risk aversion trade than anything else.
"As a company we believe we will see a recovery, so industrial metals are really the thing to look at."
Data due out on Wednesday is expected to show a tepid recovery in the Eurozone economy, with household consumption continuing to fall according to consensus estimates.
Thursday brings interest-rate decisions from both the European Central Bank in Frankfurt, and the Bank of England in London.
Looking at the technical picture for Gold Bullion, "Gold has corrected to the 50-day moving average," says David Rosenberg, chief strategist at Canadian wealth managers Gluskin Sheff, "which in the past has been a terrific entry point."
Rosenberg believes that gold's upward channel "is to be respected and to be bought."
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