While gold has mostly gone up for the last 10 or so years, there are periods where it has been broadly stable but has been divergent in different currencies. For example in 2006 and early 2007, gold didn't do very much in USD or Euro terms, perhaps because most of the focus was on carry trades on the depreciating Yen.
The more recent performance has been a bit like this period, although the currency performance has been more diverse. For example, the Euro has swapped roles with the Yen as the sick man of the currency world, although there are perhaps some signs that the pound will take over that role in the near future.
The problem with shifting views on FX rates is that the number of variables to think about when taking a view on gold increases dramatically. And as complexity increases, conviction and consensus amongst participants will decrease.
Looking at where we are today, one problem is the flip flop of views on the Euro. Back in the middle of 2012, there was a huge consensus short view with many believing the Euro would likely break up. That changed into the end of last year, with the chart left showing a big change to a speculative long position. The subsequent drop in USD helped gold bounce back.
But with indicators of Euro zone activity not improving very much (see
this post), this shift in view may be a bit premature. In the last read of the CFTC data, speculative positions on the Euro have now shifted to a small net short position.
Once upon a time, a flagging Euro was bullish for gold, particularly in 2010. But I dont think this is the case anymore, particularly as real interest rates are unlikely to drop in tandem with a fall in the Euro, as they are about as low as they can go.
Perhaps a rising dollar will see an increase in short positions in gold, which are actually relatively large at the moment. Surprisingly, speculative long positions have remained very steady, with there a bigger divergence in speculative interest in gold than there has been for sometime.
So I think gold is going to remain under pressure in the near term. But I don't see a compelling reason to take a big position one way or another at this stage, given its still trading fairly consistently.
