Forex markets have seen some interesting trends recently, with the US Dollar maintaining most of its position of dominance throughout the year. There is strong fundamental reasoning behind this activity as the US continues to show the most progress in recovery after global financial markets hit their troughs in 2009. Labor markets have shown sustainable strength and consumer spending has helped generate the better corporate earnings performances that pushed stocks to new records. The Dollar fell in line with these trends and hit highs above 1.10 in commonly traded forex instruments like the EUR/USD.
But the some of these markets have started to reverse course now that we are seeing reluctance at the Federal Reserve to start normalizing its interest rate policy. This creates an environment where we could start to see stabilization in gold markets, as investors look for an alternative store of value in a low-interest rate environment. Given the closely correlated relationship between the Dollar and precious metals, these are all factors that should be on the minds of forex traders as the open up some new opportunities for investments in an environment where options might otherwise be limited.
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