Gold vs. Trade-Weighted Dollar
Gold price and the Federal Reserve's broad dollar index (26 currencies) · Quotes delayed up to 5 minutesGold plotted against the FRED Broad Trade-Weighted Dollar Index — a measure of the dollar’s value against 26 trading-partner currencies, weighted by trade volume. Note: this is not the ICE DXY (which tracks 6 major currencies and trades near 98–100); the FRED broad index has a different base and composition. The relationship is inverse and well-established: a strengthening dollar typically pressures gold (because gold is dollar-priced and a stronger dollar reduces non-dollar buyers’ purchasing power), while a weakening dollar typically supports gold.
Analyst's Note
The gold–dollar correlation has averaged roughly -0.5 to -0.6 over multi-decade samples, but the relationship is asymmetric: gold tends to respond more strongly to dollar weakness than to dollar strength, and the response is more pronounced during episodes of acute dollar stress (1985 Plaza Accord, 2002–2008 dollar bear market, 2020 pandemic). The current relationship has decoupled somewhat — gold has rallied during periods of dollar strength, suggesting that gold is increasingly trading as a global monetary asset rather than as a pure dollar-inverse. For the macro investor, the signal to watch is not the absolute correlation but the slope of the relationship: a flattening or breaking correlation often precedes regime change.
Gold plotted against the FRED Broad Trade-Weighted Dollar Index — a measure of the dollar’s value against 26 trading-partner currencies, weighted by trade volume. Note: this is not the ICE DXY (which tracks 6 major currencies and trades near 98–100); the FRED broad index has a different base and composition. The relationship is inverse and well-established: a strengthening dollar typically pressures gold (because gold is dollar-priced and a stronger dollar reduces non-dollar buyers’ purchasing power), while a weakening dollar typically supports gold.
Analyst's Note
The gold–dollar correlation has averaged roughly -0.5 to -0.6 over multi-decade samples, but the relationship is asymmetric: gold tends to respond more strongly to dollar weakness than to dollar strength, and the response is more pronounced during episodes of acute dollar stress (1985 Plaza Accord, 2002–2008 dollar bear market, 2020 pandemic). The current relationship has decoupled somewhat — gold has rallied during periods of dollar strength, suggesting that gold is increasingly trading as a global monetary asset rather than as a pure dollar-inverse. For the macro investor, the signal to watch is not the absolute correlation but the slope of the relationship: a flattening or breaking correlation often precedes regime change.
More in Macro
Questions about what this chart means for your portfolio?