Markets are once again showing their strange resilience. On the surface, we’re still in what can be called a “risk-on” environment, but the air feels heavy with interruptions—geopolitical flare-ups that seem to emerge almost daily, only to be defused just as quickly. The Trump administration continues to stir the waters, but investors appear willing to trust in stability, however fragile, and push a little further out on the risk curve.
The VIX, sitting at 15.18, reinforces this calm. A level this low tells us that fear is subdued, and traders are leaning into risk despite the constant noise. But while equities and sentiment indicators suggest stability, other ratios paint a more complicated picture.
Take the gold-to-oil ratio. At 57.87, it’s sitting at extreme levels. One ounce of gold now buys nearly 58 barrels of oil—far above the historical norm of 10 to 30. Whenever the ratio stretches this wide, it signals an imbalance. Gold is expensive relative to oil, a sign that investors are prioritizing safety even as consumption of oil remains sluggish. To me, this confirms that gold is overvalued, while oil is undervalued. Economic stress often hides beneath this divergence, waiting to snap the market back toward equilibrium. Eventually, the pendulum will swing, and these numbers will normalize.
Currency Strength and the Gold Benchmark
Using gold as our benchmark, September’s landscape reveals clear winners and laggards among the major currencies.
The U.S. dollar, despite the ever-resilient S&P 500, is still struggling against the yellow metal. At a ratio of 1.81, gold is outperforming stocks. Yields on 10-year Treasuries are the third highest globally, behind only the UK and Australia, yet this has done little to attract meaningful flows. In the rankings, the dollar sits mid-pack—fifth strongest this month, slipping further when measured across three months, six months, and year-to-date. The once-dominant USD is, in fact, the weakest performer over longer horizons.
Contrast this with the euro. Its performance against gold is striking, consistently showing strength across every timeline. For September, the euro is the second strongest currency, behind only the Swiss franc. Over three months, six months, and year-to-date, it holds firm as the leader. Even with comparatively low German bond yields and rock-bottom ECB rates, capital continues to flow toward the single currency. It seems that in spite of the textbook expectation that “risk-on” should favor higher-yielding currencies, investors are rewarding the euro’s stability.
The pound has carved out its own strong position. In September it ranks fourth, behind the euro, Australian dollar, and franc. Across three months and six months, sterling has consistently held the third spot, reinforcing its role as a reliable middleweight performer. With the highest government bond yields and the second-highest central bank rate after the U.S., the pound has enough yield appeal to balance its volatility.
Japan, however, remains a case study in weakness. Against gold, the yen is near the bottom—seventh place this month, only narrowly avoiding the last spot. The picture doesn’t improve much over the three- and six-month views, where it remains one of the weakest. Low yields and ultra-low rates continue to weigh it down, even though on a yearly basis it claws back to fourth place. The Nikkei’s ratio versus gold is barely in the normal range, another reflection of this ongoing softness.
September 2025 so far
The commodity currencies show mixed fortunes. The Canadian dollar looks fragile, ranking as the third weakest this month and the second weakest year-to-date. Still, on shorter horizons, there are signs of life—fifth strongest over three months, for example—but sentiment has swung into overbought territory, which suggests a reversal is building. The Australian dollar, by contrast, has more solid footing. With bond yields second only to the UK and strong positioning in September, the AUD holds its ground as a respectable middle player. Yet here too, sentiment is running hot, hinting at exhaustion.
The New Zealand dollar sits somewhere in between. Sixth place for September, sixth year-to-date, and seventh over three months. But stretch the lens to six months and it moves into fourth place, showing that the kiwi can hold its own in certain cycles even if it rarely leads.
Finally, the Swiss franc continues to be the star of the show. September crowns it as the strongest currency, second only to the euro on longer timelines. It’s been a consistent safe-haven favorite, but like the CAD and AUD, franc sentiment looks stretched. The market appears overbought here too, suggesting a reversal could be on the horizon.
Closing Thoughts
This week’s picture is one of contradiction. The VIX and equity markets tell us fear is low and appetite for risk is alive, yet the gold-to-oil ratio screams imbalance. Currency markets reveal a strong euro and franc, a wobbly dollar, and fragile commodity currencies, while the yen continues to limp along under the weight of low yields.
Markets rarely move in straight lines, and what we’re seeing now is a reflection of that tension. Sentiment may favor risk-taking today, but beneath the surface, imbalances and overbought conditions are building. When they unwind, the shifts could be sharp.
see for the week’s sentiment analysis: https://takezotrading.com/commitment-of-traders-update-september-2nd-2025/