A crucial factor that continues to affect gold is the US dollar. On Wednesday, gold and the US dollar rose 0.15% and 0.12%, respectively. However, these two move in the opposite direction most of the time. On a YTD (year-to-date) basis, gold has risen 3.4%, while the dollar has lost 2.7%.
The US dollar, depicted by the DXY Currency Index, prices the dollar against a basket of six major world currencies. The US dollar and gold tend to be inversely related to each other as gold is a dollar-denominated asset. Any increases in the dollar indicate lower demand for dollar-based assets such as gold and silver. Similarly, a decline in the dollar is beneficial for precious metals. The below chart looks at the performance of gold versus the US dollar during the last one month.
The correlation between gold and the dollar over the past year is -0.60, which suggests that about 60% of the time, gold moved in the opposite direction of the dollar during the last year.
ETFs and miners
The precious-metal-based funds that closely track the miners and may thus be impacted by the US dollar (UUP) include the VanEck Vectors Gold Miners (GDX) and the Global X Silver Miners (SIL). These ETFs were up 0.22% and 2.4%, respectively, on Wednesday, following the rise of the metals.