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How Did Economic Numbers Play on DXY and Gold?

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Home sales positive

The US economic data that came out on Friday, May 20, 2016, for home sales stood at 5.5 million. That was higher than the expected 5.4 million, which is most likely positive for the economy. Data on home sales measure the annualized number of residential buildings that were sold during the previous month, excluding new construction.

Everything that plays well for the US economy likely plays well for the US dollar, too. The US dollar is depicted here by the DXY (US Dollar Index), which measures the dollar’s strength against a trade-weighted basket of these six major currencies: euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc. The US dollar has increased during the past one month. DXY surged 0.89% on a 30-day trailing basis. During the same time frame, precious metals continued to have a downward sentiment.

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US dollar and gold

The US dollar and gold, or for that matter all precious metals, have a close-knit relationship. The strength of the US dollar weighs down dollar-denominated assets such as gold and silver. That’s because investors in other currencies have to buy an expensive dollar against their home currency to invest in precious metals. The DXY increased 0.05% on Friday and settled at 95.3.

Mining shares that saw a fall in share prices, following precious metals, include Iamgold (IAG), Eldorado Gold (EGO), and Yamana Gold (AUY). These shares fell 1.6%, 0.66%, and 0.84%, respectively, on Friday. Combined, they contribute 9% to the price changes in the VanEck Vectors Gold Miners ETF (GDX).

The mining funds that increased despite the fall in precious metals include the Global X Silver Miners ETF (SIL) and the VanEck Vectors Junior Gold Miners ETF (GDXJ). These two funds saw a rise of 1.1% and 0.96%, respectively, on Friday, May 20, 2016.

Next, let’s see why SPDR gold shares rose in May.

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