September has given us a very strong run in stocks (ES futures; top chart), as major currencies have strengthened vs. the U.S. dollar (euro futures; middle chart). With a weaker dollar, gold denominated in dollars has continued to make new highs.
My hunch is that central banks won't reverse their policies, which include a managed decline in the dollar, until inflation gives them a mandate and political cover to do so. Rising unemployment and shaky housing provides no such cover.
Should oil prices follow gold to headline new highs, we might be closer to a mandate. Until then, the path of least resistance continues to be up for stocks, down for the dollar.
For more on intermarket correlations, check out this post..