Gold and DXY
Gold and the US dollar have a close inverse relationship with each other. As precious metals are priced in greenback terms, a rise in the greenback often curbs the appeal of assets that priced in dollars, because investors have to invest in the more expensive dollar to buy the assets. The recent global market unrest, thus, has caused investors to deposit their money in haven assets like gold and Treasuries, and a few have also opted for the US dollar as well as the Japanese yen.
That said, the DXY currency, which means the dollar against the basket of six major world currencies—the euro, Swiss franc, Swedish krona, British sterling pound, Canadian dollar, and Japanese yen—has gained by about 0.18% on a trailing-30-day basis. During the same time frame, we’ve also witnessed a 6.4% rise in gold. This simultaneous rise is due to haven calls on investments.
As the above chart shows, both gold and the US dollar are following a similar reaction instead of an opposite reaction. Yet the latest five-day performance of these assets has been in line with overall long-term performance. As the US dollar or DXY currency fell by 0.10%, gold gained by about 1.1%. Rising and falling gold is often predicted by the SPDR Gold Shares (GLD) or the iShares Gold Trust (IAU), which have earned 0.75% and 0.74%, respectively, on a trailing-five-day basis, as of February 1.
By comparison, a few of the stocks that performed negatively during the past week include Aurico Gold (AUQ), AngloGold Ashanti (AU), and Cia De Minas Buenaventura (BVN). These three stocks fell by 4.5%, 1.37%, and 0.72%, respectively, on a trailing-five-day basis. Together, these three companies make up 8.7% of the price changes in the VanEck Vectors Gold Miners ETF (GDX).
Continue to the next part for our discussion of the current relationship between gold and oil.