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The Correlation between Gold, the US Dollar, and Miners

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The dollar connection

Although interest rate hikes and other speculations in the market have had visible effects on precious metals over the last month, the US dollar (UUP) has played the most important role in precious metal prices. Historically, gold and the dollar have a marked inverse relationship.

Whereas the dollar, represented by the DXY Currency Index (or DXY), has fallen 8.1% this year, gold and silver have risen. While gold and the dollar tend to have an inverse relationship, they can sometimes move in the same direction, as they did on December 15. The DXY rose 0.47%, and gold, silver, and platinum also rose.

Denomination of precious metals

As gold (GLD) and silver (SLV) are dollar-denominated assets, they react negatively to US dollar increases. When the dollar surges, it is more expensive for international investors, and dollar-priced assets are thereby more expensive. Likewise, miners tend to trend oppositely to the dollar. However, on Friday, Coeur Mining (CDE), IAMGOLD (IAG), Harmony Gold (HMY), and Eldorado Gold (EGO) rose 3.4%, 0.18%, 2.3%, and 1.6%, respectively, along with the dollar and precious metals. 

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