Friday
Jun182010
Gold vs Dollar Correlation
Friday, June 18, 2010 at 09:34AM With gold trading at a record high, we wanted to highlight the shifting correlation between it and the US Dollar. Normally, when gold rallies, the dollar declines and vice versa. However, as the chart below illustrates, gold and the dollar have become increasingly unlinked. In the chart, positive readings close to one indicate a strong positive correlation, while readings closer to negative one indicate a strong inverse correlation. The current level of -0.18 indicates a very weak inverse correlation.
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Reader Comments (5)
Although the correlation is mildly negative at this point, it appears that dollar and gold are becoming increasingly linked as the trend is definitely up.
Re: Comment "trend is..up"
As the entry notes: "readings closer to negative one indicate a strong inverse correlation."
The last several month's upward trending line means gold's predominantly inverse correlation has collapsed back to almost no correlation, neither negative nor positive.
Also, I presume by dollar the author means USD, the exchange rate basket weighted 60% to Euro.
Inverse correlation is much stronger with Fed's or similar $ index of 40+ top trading partners. Dollar is down half since 1985 on such indices.
But what would voters think if media let dat cat outta da bag?
People are buying Gold despite dollar strength knowing it is just a matter of time before our misguided monetary/fiscal policies catch up to us
I'm not sure we can really draw any conclusions from this data yet. As we can see that over the past ten years, shown on the graph, the gold and dollar correlation as regularly moved between -1 and .5. I don't see any real convincing trend at this point. Although, the most recent data indicates less correlation.
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