The Gold SPDR (GLD), Euro ETF (FXE) and the 20+ YR T-Bond ETF (TLT) are all up year-to-date and showing positive correlation. This is not a big surprise because gold is negatively correlated to the Dollar and negatively correlated to the 10-yr T-Yield ($TNX). The Euro accounts for around 57% of the US Dollar ETF (UUP) and a strong Euro translates into a weak Dollar ETF. Treasury bonds and yields move in opposite directions and this means higher bond prices translate into lower yields. Furthermore, chartists can clearly see that GLD, FXE and TLT were down from September to December. The correlation here is also positive because all three moved in the same direction.
Chartists looking for clues on the Gold SPDR (GLD) should, therefore, continue to focus on the Euro ETF (FXE) and the 20+ YR T-Bond ETF (TLT). The Euro ETF surged to its highest level since early November and shows a clear uptrend in 2017. TLT is also in an uptrend since mid December, but this uptrend is less pronounced. Nevertheless, TLT did forge a higher high in late April by breaking the January-February highs. Continued strength in FXE and TLT should benefit gold.
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--Arthur Hill CMT
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