uploads///Gold price versus DXY Currency

Gold and the Dollar: Opposite Movements in November

By

Dec. 6 2016, Updated 10:32 a.m. ET

DXY and gold move in opposite directions

The fall in the price of gold on Monday, December 5, 2016, was partly determined by changes in the US dollar. The US dollar had been rising on expectations that the US Federal Reserve would raise interest rates at its next policymaking meeting.

The US Dollar Index (or DXY), which measures the greenback against a basket of six major world currencies, fell 0.64% on Monday, November 28, 2016. The yield on ten-year U.S. Treasuries fell from a 16-month high of 2.4% at the end of November.

The DXY rose 3.2% on a 30-day trailing basis, while gold fell during the same time frame. Gold and silver have fallen 10.5% and 9.1%, respectively, during the same period.

Fluctuations in the dollar are a major determinant of changes in the prices of precious metals. Changes in gold and the US dollar are shown in the above graph. As you can see, they mostly have an inverse relationship. The higher the dollar, the lower the demand for dollar-denominated assets.

Article continues below advertisement

Correlation between the US dollar and gold

The correlation between gold and the DXY is -0.36, which means that about 36.0% of the time, gold and the dollar move in opposite directions. Silver’s correlation with the DXY is -0.32.

These changes, based on the dollar, can also be seen in mining funds such as the iShares Gold Trust (IAU) and the Global X Silver Miners ETF (SIL). These two funds have seen massive year-to-date rises alongside precious metals, but they fell during the past month.

Mining stocks that have fallen in the past month include Sibanye Gold (SBGL), Gold Fields (GFI), Yamana Gold (AUY), and AuRico Gold (AUQ).

Advertisement

More From Market Realist

  • Open sign on a sidewalk
    Macroeconomic Analysis
    Top Reopening Stocks to Play the Shifting Market Sentiment
  • Morgan Stanley sign and stock numbers
    Macroeconomic Analysis
    Morgan Stanley's Buyback Stock Picks in 2021
  • Black Wall Street sign is sign of ethical investing
    Macroeconomic Analysis
    Ethical Investing Stocks and Funds for Your 2021 Portfolio
  • New York City skyline and Goldman Sachs logo
    Macroeconomic Analysis
    Goldman Sachs: Options Trade Picks to Play Earnings Season Volatility
  • CONNECT with Market Realist
  • Link to Facebook
  • Link to Twitter
  • Link to Instagram
  • Link to Email Subscribe
Market Realist Logo
Do Not Sell My Personal Information

© Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.