The new calm that is working its way through the Euro Zone may have triggered a huge drop in the gold market and the subsequent rally in the Euro. Traders are saying this move was triggered by the unwinding of Euro-Gold spread trades which were placed when traders bought gold in Euros during the currency crisis.

U.S. equity markets rallied sharply higher on Thursday as tensions eased in the Euro Zone prompting investors to turn up demand for higher risk assets. The strong surge in the June E-mini S&P 500 negated Wednesday’s hard sell-off, triggering a rally through the minor retracement zone at 1074.50 to 1082.25.

U.S. stock indices sold off early in the trading session as fear swept through the markets. News that Greece’s budget problems could escalate along with Portugal sent traders into the Dollar and Japanese Yen and out of higher risk assets. Lower than expected U.S. economic reports also contributed to the weakness as traders liquidated positions in anticipation of a slowdown in the economy.

A renewed surge in demand for yielding assets is helping to drive crude oil and gold prices overnight. A firm undertone is also developing in the equity markets while the Dollar is under pressure.