Dollar slump

Over the past few months, the most important element in determining the price of the precious metals has been the US dollar (UUP).

In 2017, gold took much of its price fluctuations from the dollar, and the two maintained a close-knit relationship. They are inversely related because precious metals are dollar-based assets, which means that they’re priced in the dollar. An investor who wants to buy gold often has to invest in the dollar first.

Is the US Dollar Correlated with Gold? January 2018 Insights

The chart above depicts the inverse relationship between the dollar and gold during the last month. The rise in the dollar deters investors from other countries, so gold demand is also negatively affected. Similarly, a fall in the dollar attracts investors, leading to stimulation in demand for dollar-based assets as well.

The dollar has seen a steep falling trend since 2017 on expectations that central banks across the globe, besides the Federal Reserve, are seeking to keep a low profile in terms of monetary policy. Interest rates may even be detrimental. The shutdown of the US government also added to the negativity of the dollar.

Correlation analysis

The US dollar depicted by the U.S Dollar Index (DXY) has fallen ~3.1% during the past month and ~0.44% over the past five trading days. Gold (IAU) and silver (SLV) have seen rises of ~5.6% each during the past month. Much of this fall could be due to the fall in the dollar.

The correlation of gold and the US dollar has been -0.48 in the past year, suggesting that ~48% of the time, gold has moved in the opposite direction of the dollar over the past year.

The mining shares that have also seen price rises in the past month include IAMGOLD (IAG), AngloGold Ashanti (AU), Coeur Mining (CDE), and Yamana Gold (AUY). These have risen 5.3%, 12.1%, 13.5%, and 14.1%, respectively.

Latest articles

Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.

The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.

Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.

Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.

14 Jun

IEA Again Slashes Its Oil Demand Growth Estimate

WRITTEN BY Rabindra Samanta

As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.

14 Jun

Why Kimberly-Clark Stock May Stop Rising


Kimberly-Clark (KMB) stock has risen 20.5% this year, boosted by the company’s better-than-expected sales and earnings during its last reported quarter. However, its stock could stop climbing. Here's why.