Exploring the correlation between the U.S. dollar index (major currencies) and Gold (iShares Comex Gold).

Theory
It is widely known that historically there is an inverse relationship between the price of Gold and the USD. So, what happens when one of the two does not respond as expected to a move in the others price?
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Gold has slipped a little lower as market players anticipate the Fed’s upcoming interest rate decision. Yesterday’s rally above $930 USD has no doubt caused some profit taking, with other investors positioning themselves in case the anticipated 50 basis point cut from the Fed does not eventuate. Investors remain uncertain as to how much assistance the US central bank will offer the struggling stock market.

Forex investors have already priced in a 50 basis point cut to the value of the USD. Investors expect a 50 basis point cut will see an increase in the value of gold, while a lesser rate cut could see a correction in the price of precious metals.
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