While one day does not make a trend – it was interesting to note the interesting pattern today of Gold (and other commodities such as Coffee, Cotton, Corn, Sugar, Wheat) rallying in the face of a rally in the US Dollar.  The reasoning is that Euro Zone debt problems are surfacing again…. Greeks Credit Default Swaps are back at their highs, which is in turn ‘scaring’ people into the US Dollar and Gold.

One of the big drivers of the rise in Gold and other commodities of late has been dollar weakness, and while we don’t see the chance of it happening in other commodities, it would be interesting to see Gold ‘change its stripes’ from an inflationary play to a defensive, flight to safety play should those Euro Zone debt fears resurface and push global markets down to close the year. The other commodities would need major supply disruptions to offset dollar strength in a global sell off to remain in an uptrend (like the Russian drought).

Wile Gold has seemed hyper correlated (inversely so) with the US Dollar of late, that relationship could unwind in a hurry should both take on flight to safety profiles.  That would be a sort of silver lining for those managed futures managers holding long nearly every commodity and at risk of an across the board reversal, as Gold acting as a flight to safety could cushion some of the blow.

For those craps players among you, it would be like winning your come bet when a 7 comes out, but losing all your other points. Stay tuned….