Any chance you can post context? Every time you put a link it tries to send me to Bulgaria Hedge which most would never click on. Starting to think not only do you spend a bunch of time there but perhaps you are a rep? The "Legendary" Turd ferguson perhaps? Hope I'm wrong. Au, she certainly appears to be signaling rough seas ahead. RGDS!
@blitzdude said:
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
Sorry to rain on your parade but record gold prices tell us all is not well with America's economic outlook. Gold is the canary in the coal mine. God will reward those who see this and are correctly prepared for it.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
@jmski52 said:
$2,240 on Comex isn't relevant unless you have a few futures contracts and plan to take delivery.
It is still a valid price quote for gold and as I understand, is the basis at least in some aspect for all other price quotes or markets.
Current spot price of all precious metals is the starting point to pricing products made from those metals. Spot + premium is the market price.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
@blitzdude said:
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
Sorry to rain on your parade but record gold prices tell us all is not well with America's economic outlook. Gold is the canary in the coal mine. God will reward those who see this and are correctly prepared for it.
What does record stock market prices tell us? Or how about record residential real estate prices? Has God bestowed his blessing on those who own stocks and real estate?
@blitzdude said:
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
Sorry to rain on your parade but record gold prices tell us all is not well with America's economic outlook. Gold is the canary in the coal mine. God will reward those who see this and are correctly prepared for it.
What does record stock market prices tell us? Or how about record residential real estate prices? Has God bestowed his blessing on those who own stocks and real estate?
I addressed those items over in the stock and real estate forums. I believe the discussion here is about gold.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
@blitzdude said:
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
Sorry to rain on your parade but record gold prices tell us all is not well with America's economic outlook. Gold is the canary in the coal mine. God will reward those who see this and are correctly prepared for it.
What does record stock market prices tell us? Or how about record residential real estate prices? Has God bestowed his blessing on those who own stocks and real estate?
I addressed those items over in the stock and real estate forums. I believe the discussion here is about gold.
And discussion of God belongs in a gold forum?
H Y P O C R I S Y
Gold is finally catching up to other assets. Yay!!!
What does record stock market prices tell us? Or how about record residential real estate prices? Has God bestowed his blessing on those who own stocks and real estate?
No different than Weimar.
Q: Are You Printing Money? Bernanke: Not Literally
@blitzdude said:
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
Sorry to rain on your parade but record gold prices tell us all is not well with America's economic outlook. Gold is the canary in the coal mine. God will reward those who see this and are correctly prepared for it.
What does record stock market prices tell us? Or how about record residential real estate prices? Has God bestowed his blessing on those who own stocks and real estate?
I addressed those items over in the stock and real estate forums. I believe the discussion here is about gold.
And discussion of God belongs in a gold forum?
H Y P O C R I S Y
Gold is finally catching up to other assets. Yay!!!
Blitzboy brought him into the conversation ("USD is strong! God Bless America."). I simply followed up with who God will reward. I know you think you are God, but there are other ones.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
The U.S. dollar index measures only the dollar against a basket of other currencies. Inflation is worldwide, including the U.S. dollar.
True, however, the USD index is highly inverse correlated to the price of gold, so on days like yesterday when the index has a big pullback it's typical to see the price of gold run. The gold price movement is most likely not due to a huge rush of gold buying.
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
The U.S. dollar index measures only the dollar against a basket of other currencies. Inflation is worldwide, including the U.S. dollar.
True, however, the USD index is highly inverse correlated to the price of gold, so on days like yesterday when the index has a big pullback it's typical to see the price of gold run. The gold price movement is most likely not due to a huge rush of gold buying.
In January 1974, more than 50 years ago, the U.S. dollar index was 105.9 (it's currently 104.06).
In January 1974, the price of gold was $130 per ounce.
Doesn't look that inverse correlated to me.
@blitzdude said:
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
Sorry to rain on your parade but record gold prices tell us all is not well with America's economic outlook. Gold is the canary in the coal mine. God will reward those who see this and are correctly prepared for it.
What does record stock market prices tell us? Or how about record residential real estate prices? Has God bestowed his blessing on those who own stocks and real estate?
I addressed those items over in the stock and real estate forums. I believe the discussion here is about gold.
Information about the REAL condition of the U.S. economy has been out for a while. Why the sudden (last couple of weeks) house in the gold price to almost daily record highs?
The longer I live the more convincing proofs I see of this truth, that God governs in the affairs of men. And if a sparrow cannot fall to the ground without His notice is it possible for an empire to rise without His aid? Benjamin Franklin
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
The U.S. dollar index measures only the dollar against a basket of other currencies. Inflation is worldwide, including the U.S. dollar.
True, however, the USD index is highly inverse correlated to the price of gold, so on days like yesterday when the index has a big pullback it's typical to see the price of gold run. The gold price movement is most likely not due to a huge rush of gold buying.
In January 1974, more than 50 years ago, the U.S. dollar index was 105.9 (it's currently 104.06).
In January 1974, the price of gold was $130 per ounce.
Doesn't look that inverse correlated to me.
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
The U.S. dollar index measures only the dollar against a basket of other currencies. Inflation is worldwide, including the U.S. dollar.
True, however, the USD index is highly inverse correlated to the price of gold, so on days like yesterday when the index has a big pullback it's typical to see the price of gold run. The gold price movement is most likely not due to a huge rush of gold buying.
In January 1974, more than 50 years ago, the U.S. dollar index was 105.9 (it's currently 104.06).
In January 1974, the price of gold was $130 per ounce.
Doesn't look that inverse correlated to me.
Does this chart change your mind?
Not really. Draw a straight line from the start of the blue line to the end. Then draw a straight line from the start of the gold line to the end. Explain the difference.
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
The U.S. dollar index measures only the dollar against a basket of other currencies. Inflation is worldwide, including the U.S. dollar.
True, however, the USD index is highly inverse correlated to the price of gold, so on days like yesterday when the index has a big pullback it's typical to see the price of gold run. The gold price movement is most likely not due to a huge rush of gold buying.
In January 1974, more than 50 years ago, the U.S. dollar index was 105.9 (it's currently 104.06).
In January 1974, the price of gold was $130 per ounce.
Doesn't look that inverse correlated to me.
Does this chart change your mind?
Not really. Draw a straight line from the start of the blue line to the end. Then draw a straight line from the start of the gold line to the end. Explain the difference.
It's a correlation not a fixed relationship. In general, if you look at the large movements of the USD index going down, you see the POG going up, and vice versa.
Didn't say it was a fixed relationship, but the fact that gold went up 17 times while the dollar index barely budged should give one pause.
Also, a granular examination of that chart reveals that there are many instances of weak or nonexistent inverse correlations. 2010, 2015 and 2022-to-present-day for instance. There are others.
@blitzdude said:
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
Sorry to rain on your parade but record gold prices tell us all is not well with America's economic outlook. Gold is the canary in the coal mine. God will reward those who see this and are correctly prepared for it.
What does record stock market prices tell us? Or how about record residential real estate prices? Has God bestowed his blessing on those who own stocks and real estate?
I addressed those items over in the stock and real estate forums. I believe the discussion here is about gold.
Information about the REAL condition of the U.S. economy has been out for a while. Why the sudden (last couple of weeks) house in the gold price to almost daily record highs?
Misinformation is more like it. Does anyone seriously believe that the cost of living has gone up only 20% since the start of Covid 4 years ago? Mine has increased a lot more, and I'm a homeowner.
In January 1974, more than 50 years ago, the U.S. dollar index was 105.9 (it's currently 104.06).
In January 1974, the price of gold was $130 per ounce.
Doesn't look that inverse correlated to me.
Irregardless the price of gold, it's relationship with the dollar index is typically inverse (negative) over time.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
I stick with my decades long proclamation that gold price is a result of faith in the currency it is being priced in.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
@Overdate said:
Didn't say it was a fixed relationship, but the fact that gold went up 17 times while the dollar index barely budged should give one pause.
It means there are additional market dynamics that affect the price.
Also, a granular examination of that chart reveals that there are many instances of weak or nonexistent inverse correlations. 2010, 2015 and 2022-to-present-day for instance. There are others.
For any commodity there are of course market dynamics that influence the price that can overcome the currency index that the commodity is priced in. But if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship.
The original point I made is that with the USD index falling almost 1% in the past few days is pushing gold, silver, and other commodity prices up. That by itself could explain the increases the last few days better than speculating about an increase in buying. An increase in buying would typically result in an increase in premiums. I don't have any data on that.
@ProofCollection said:
Why can't it be the US Dollar index going down?
It could. Here's another reason: because U.S. assets are the best in the world. You think people want their money with Putin or the Chinese Communist Party ?
@Overdate said:
Not really. Draw a straight line from the start of the blue line to the end. Then draw a straight line from the start of >the gold line to the end. Explain the difference.
What I see is that the "Gold Up, Dollar Down" relationship doesn't hold over all time periods.
Keep in mind that as the global reserve financial currency, the supply of dollars must be LARGER than domestic demand and by necessity deflate over time.
@Overdate said:
Didn't say it was a fixed relationship, but the fact that gold went up 17 times while the dollar index barely budged should give one pause.
It means there are additional market dynamics that affect the price.
Also, a granular examination of that chart reveals that there are many instances of weak or nonexistent inverse correlations. 2010, 2015 and 2022-to-present-day for instance. There are others.
For any commodity there are of course market dynamics that influence the price that can overcome the currency index that the commodity is priced in. But if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship.
The original point I made is that with the USD index falling almost 1% in the past few days is pushing gold, silver, and other commodity prices up. That by itself could explain the increases the last few days better than speculating about an increase in buying. An increase in buying would typically result in an increase in premiums. I don't have any data on that.
"if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship."
At the end of June 1995, the dollar index was 81.71 and the price of gold was $387.60.
Since then, the dollar index has gone up 27% and the price of gold has gone up 592%..
Does this mean that there is actually a strong positive correlation between the dollar index and the price of gold, or that somehow a 29-year run of "market dynamics" caused a negative relationship to be hidden?
I'm not saying that the correlation is positive or negative, I'm saying the dollar index is a measure of the dollar against other currencies, period, and cannot properly be used as an inverse proxy for gold.
"Market dynamics" can be used as a catch-all to explain anything, but in reality it explains nothing.
In January 1974, more than 50 years ago, the U.S. dollar index was 105.9 (it's currently 104.06).
In January 1974, the price of gold was $130 per ounce.
Doesn't look that inverse correlated to me.
Irregardless the price of gold, it's relationship with the dollar index is typically inverse (negative) over time.
Your chart only goes up to 2007. If you replace it with a chart from 2007 to present day, both the dollar index and the price of gold are up, and the relationship of the two is positive.
As I mentioned above, "I'm not saying that the correlation is positive or negative, I'm saying the dollar index is a measure of the dollar against other currencies, period, and cannot properly be used as an inverse proxy for gold."
Let me try to clear up the confusion regarding correlations!
If you want to determine whether two time series are correlated, you need to specify the time interval you are interested in. For example, is it daily, monthly, quarterly, or annual? This can make a big difference.
For example, suppose stock A and stock B behave as follows:
Stock A: always up 10 % in Q1 and Q3, always down 5 % in Q2 and Q4.
Stock B: always up 10 % in Q2 and Q4, always down 5 % in Q1 and Q3.
In this example, for quarterly correlations, Stock A and Stock B are inversely correlated.
However, both Stock A and Stock B each gain about 9 % annually. So, for annual correlation, they show 100 % positive correlation.
The chart that @derryb posted suggests that from 1975 - 2008, gold and the dollar were inversely correlated if you measure correlation over roughly 2 year intervals.
(which interval you specific will depend on what you are trying to understand; for example, what type of trading strategy you may want to implement)
@Overdate said:
Didn't say it was a fixed relationship, but the fact that gold went up 17 times while the dollar index barely budged should give one pause.
It means there are additional market dynamics that affect the price.
Also, a granular examination of that chart reveals that there are many instances of weak or nonexistent inverse correlations. 2010, 2015 and 2022-to-present-day for instance. There are others.
For any commodity there are of course market dynamics that influence the price that can overcome the currency index that the commodity is priced in. But if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship.
The original point I made is that with the USD index falling almost 1% in the past few days is pushing gold, silver, and other commodity prices up. That by itself could explain the increases the last few days better than speculating about an increase in buying. An increase in buying would typically result in an increase in premiums. I don't have any data on that.
"if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship."
At the end of June 1995, the dollar index was 81.71 and the price of gold was $387.60.
Since then, the dollar index has gone up 27% and the price of gold has gone up 592%..
Does this mean that there is actually a strong positive correlation between the dollar index and the price of gold, or that somehow a 29-year run of "market dynamics" caused a negative relationship to be hidden?
I'm not saying that the correlation is positive or negative, I'm saying the dollar index is a measure of the dollar against other currencies, period, and cannot properly be used as an inverse proxy for gold.
Of course not. It's not a perfect correlation.
"Market dynamics" can be used as a catch-all to explain anything, but in reality it explains nothing.
It is a broad term but how else do you describe market events that affect supply and demand and drive prices beyond the effects of changes to valuation of the currency it's priced in? With a commodity like gold priced in US Dollars, there are really two things that affect price. 1) Changes to the value of the pricing unit (the USD) and 2) Changes to supply and demand. What you see on the chart is a combination of these two factors. Over periods of time where supply and demand are mostly balanced any movement is due to changes in the value of the dollar. Over periods of time where the value of the USD is relatively constant, changes in price are due to changes in supply and demand.
Your chart only goes up to 2007. If you replace it with a chart from 2007 to present day, both the dollar index and the price of gold are up, and the relationship of the two is positive.
As I mentioned above, "I'm not saying that the correlation is positive or negative, I'm saying the dollar index is a measure of the dollar against other currencies, period, and cannot properly be used as an inverse proxy for gold."
The relationship as I said, over time (including up to present time "is typically inverse." Yes, there are some short periods where there is a direct relationship, but historically the relationship is a good measure of how fiat currency is dying and gold is "insurance."
The charts of currency/gold relationships of numerous countries also do show that the currency is an inverse proxy for gold.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Your chart only goes up to 2007. If you replace it with a chart from 2007 to present day, both the dollar index and the price of gold are up, and the relationship of the two is positive.
As I mentioned above, "I'm not saying that the correlation is positive or negative, I'm saying the dollar index is a measure of the dollar against other currencies, period, and cannot properly be used as an inverse proxy for gold."
The relationship as I said, over time (including up to present time "is typically inverse." Yes, there are some short periods where there is a direct relationship, but historically the relationship is a good measure of how fiat currency is dying and gold is "insurance."
The charts of currency/gold relationships of numerous countries also do show that the currency is an inverse proxy for gold.
The topic under discussion is the dollar index in relationship to gold, not the dollar itself. The dollar index has remained in a tight channel over the past 50+ years, while gold has soared.
To keep the conversation on point, we need to be talking about the same relationship.
@Overdate said:
Didn't say it was a fixed relationship, but the fact that gold went up 17 times while the dollar index barely budged should give one pause.
It means there are additional market dynamics that affect the price.
Also, a granular examination of that chart reveals that there are many instances of weak or nonexistent inverse correlations. 2010, 2015 and 2022-to-present-day for instance. There are others.
For any commodity there are of course market dynamics that influence the price that can overcome the currency index that the commodity is priced in. But if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship.
The original point I made is that with the USD index falling almost 1% in the past few days is pushing gold, silver, and other commodity prices up. That by itself could explain the increases the last few days better than speculating about an increase in buying. An increase in buying would typically result in an increase in premiums. I don't have any data on that.
"if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship."
At the end of June 1995, the dollar index was 81.71 and the price of gold was $387.60.
Since then, the dollar index has gone up 27% and the price of gold has gone up 592%..
Does this mean that there is actually a strong positive correlation between the dollar index and the price of gold, or that somehow a 29-year run of "market dynamics" caused a negative relationship to be hidden?
I'm not saying that the correlation is positive or negative, I'm saying the dollar index is a measure of the dollar against other currencies, period, and cannot properly be used as an inverse proxy for gold.
Of course not. It's not a perfect correlation.
"Market dynamics" can be used as a catch-all to explain anything, but in reality it explains nothing.
It is a broad term but how else do you describe market events that affect supply and demand and drive prices beyond the effects of changes to valuation of the currency it's priced in? With a commodity like gold priced in US Dollars, there are really two things that affect price. 1) Changes to the value of the pricing unit (the USD) and 2) Changes to supply and demand. What you see on the chart is a combination of these two factors. Over periods of time where supply and demand are mostly balanced any movement is due to changes in the value of the dollar. Over periods of time where the value of the USD is relatively constant, changes in price are due to changes in supply and demand.
If you agree that the dollar index cannot be used as an inverse proxy for gold, then this discussion is effectively over.
As to your second point, there is really only one thing that affects the dollar price of gold, and that's the second thing you describe, changes to supply and demand of the currency. Your number two point directly leads to your number one point, changes in the value of the pricing unit in terms of gold. Value is determined by supply and demand. In the rare case in which the value of the pricing unit in terms of gold is unilaterally changed by government decree, as occurred under Roosevelt in 1933, there is still only one thing that affects the price, and that is the first thing you describe, changes to the value of the pricing unit in terms of gold. This leads directly to changes in supply and demand for dollars, as people adjust to the increase or decrease in the number of units of the currency required to obtain a given amount of gold. Once the currency has no backing, then changes to supply and demand for both gold and the dollar become the only determinants of changes in value of gold in terms of the dollar.
@Overdate said:
Didn't say it was a fixed relationship, but the fact that gold went up 17 times while the dollar index barely budged should give one pause.
It means there are additional market dynamics that affect the price.
Also, a granular examination of that chart reveals that there are many instances of weak or nonexistent inverse correlations. 2010, 2015 and 2022-to-present-day for instance. There are others.
For any commodity there are of course market dynamics that influence the price that can overcome the currency index that the commodity is priced in. But if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship.
The original point I made is that with the USD index falling almost 1% in the past few days is pushing gold, silver, and other commodity prices up. That by itself could explain the increases the last few days better than speculating about an increase in buying. An increase in buying would typically result in an increase in premiums. I don't have any data on that.
"if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship."
At the end of June 1995, the dollar index was 81.71 and the price of gold was $387.60.
Since then, the dollar index has gone up 27% and the price of gold has gone up 592%..
Does this mean that there is actually a strong positive correlation between the dollar index and the price of gold, or that somehow a 29-year run of "market dynamics" caused a negative relationship to be hidden?
I'm not saying that the correlation is positive or negative, I'm saying the dollar index is a measure of the dollar against other currencies, period, and cannot properly be used as an inverse proxy for gold.
Of course not. It's not a perfect correlation.
"Market dynamics" can be used as a catch-all to explain anything, but in reality it explains nothing.
It is a broad term but how else do you describe market events that affect supply and demand and drive prices beyond the effects of changes to valuation of the currency it's priced in? With a commodity like gold priced in US Dollars, there are really two things that affect price. 1) Changes to the value of the pricing unit (the USD) and 2) Changes to supply and demand. What you see on the chart is a combination of these two factors. Over periods of time where supply and demand are mostly balanced any movement is due to changes in the value of the dollar. Over periods of time where the value of the USD is relatively constant, changes in price are due to changes in supply and demand.
If you agree that the dollar index cannot be used as an inverse proxy for gold, then this discussion is effectively over.
OK, but you still can't ignore the fact that when the USD index moves significantly it is almost always associated with an inverse move in the price of all things priced in USD. Key word is "almost always" because yes there are exceptions where supply and demand overwhelm the currency effects.
As to your second point, there is really only one thing that affects the dollar price of gold, and that's the second thing you describe, changes to supply and demand of the currency. Your number two point directly leads to your number one point, changes in the value of the pricing unit in terms of gold. Value is determined by supply and demand. In the rare case in which the value of the pricing unit in terms of gold is unilaterally changed by government decree, as occurred under Roosevelt in 1933, there is still only one thing that affects the price, and that is the first thing you describe, changes to the value of the pricing unit in terms of gold. This leads directly to changes in supply and demand for dollars, as people adjust to the increase or decrease in the number of units of the currency required to obtain a given amount of gold. Once the currency has no backing, then changes to supply and demand for both gold and the dollar become the only determinants of changes in value of gold in terms of the dollar.
Not really. If I understand your response right you are associating demand for US dollars with demand for gold but they are separate markets. In the US, fed policy and central bank lending policies affect demand for USD significantly along with factors like money velocity in the economy, not the government. Although the government pretends that the federal reserve is a government entity, it is not. Thus an interest rate announcement can cause the USD index to move which then results in a change in the price of gold, corn, pork bellies, etc.
@Overdate said:
Didn't say it was a fixed relationship, but the fact that gold went up 17 times while the dollar index barely budged should give one pause.
It means there are additional market dynamics that affect the price.
Also, a granular examination of that chart reveals that there are many instances of weak or nonexistent inverse correlations. 2010, 2015 and 2022-to-present-day for instance. There are others.
For any commodity there are of course market dynamics that influence the price that can overcome the currency index that the commodity is priced in. But if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship.
The original point I made is that with the USD index falling almost 1% in the past few days is pushing gold, silver, and other commodity prices up. That by itself could explain the increases the last few days better than speculating about an increase in buying. An increase in buying would typically result in an increase in premiums. I don't have any data on that.
"if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship."
At the end of June 1995, the dollar index was 81.71 and the price of gold was $387.60.
Since then, the dollar index has gone up 27% and the price of gold has gone up 592%..
Does this mean that there is actually a strong positive correlation between the dollar index and the price of gold, or that somehow a 29-year run of "market dynamics" caused a negative relationship to be hidden?
I'm not saying that the correlation is positive or negative, I'm saying the dollar index is a measure of the dollar against other currencies, period, and cannot properly be used as an inverse proxy for gold.
Of course not. It's not a perfect correlation.
"Market dynamics" can be used as a catch-all to explain anything, but in reality it explains nothing.
It is a broad term but how else do you describe market events that affect supply and demand and drive prices beyond the effects of changes to valuation of the currency it's priced in? With a commodity like gold priced in US Dollars, there are really two things that affect price. 1) Changes to the value of the pricing unit (the USD) and 2) Changes to supply and demand. What you see on the chart is a combination of these two factors. Over periods of time where supply and demand are mostly balanced any movement is due to changes in the value of the dollar. Over periods of time where the value of the USD is relatively constant, changes in price are due to changes in supply and demand.
If you agree that the dollar index cannot be used as an inverse proxy for gold, then this discussion is effectively over.
OK, but you still can't ignore the fact that when the USD index moves significantly it is almost always associated with an inverse move in the price of all things priced in USD. Key word is "almost always" because yes there are exceptions where supply and demand overwhelm the currency effects.
No, it is not “almost always associated with an inverse move in the price of all things priced in USD.” It is most strongly associated with goods that are imported, for obvious reasons. Domestically produced goods that are consumed in the U.S. are typically little affected.
As to your second point, there is really only one thing that affects the dollar price of gold, and that's the second thing you describe, changes to supply and demand of the currency. Your number two point directly leads to your number one point, changes in the value of the pricing unit in terms of gold. Value is determined by supply and demand. In the rare case in which the value of the pricing unit in terms of gold is unilaterally changed by government decree, as occurred under Roosevelt in 1933, there is still only one thing that affects the price, and that is the first thing you describe, changes to the value of the pricing unit in terms of gold. This leads directly to changes in supply and demand for dollars, as people adjust to the increase or decrease in the number of units of the currency required to obtain a given amount of gold. Once the currency has no backing, then changes to supply and demand for both gold and the dollar become the only determinants of changes in value of gold in terms of the dollar.
Not really. If I understand your response right you are associating demand for US dollars with demand for gold but they are separate markets. In the US, fed policy and central bank lending policies affect demand for USD significantly along with factors like money velocity in the economy, not the government. Although the government pretends that the federal reserve is a government entity, it is not. Thus an interest rate announcement can cause the USD index to move which then results in a change in the price of gold, corn, pork bellies, etc.
>
U.S. dollars and gold are not separate markets, they are linked. The two are competitive with each other as forms of money. If the Fed raises interest rates, it becomes more attractive to hold dollars in a money market account or treasury bond as compared to gold. The reverse is also true.
No, it is not “almost always associated with an inverse move in the price of all things priced in USD.” It is most strongly associated with goods that are imported, for obvious reasons. Domestically produced goods that are consumed in the U.S. are typically little affected.
U.S. dollars and gold are not separate markets, they are linked.
They haven't been for 50 years thanks to Nixon.
The two are competitive with each other as forms of money. If the Fed raises interest rates, it becomes more attractive to hold dollars in a money market account or treasury bond as compared to gold. The reverse is also true.
There is a popular belief that gold prices have an inverse relationship with increasing interest rates. The idea is that, since higher interest rates make fixed-income investments like bonds more attractive, money will flow out of gold and into high-yielding investments as rates rise. However, historical data shows no significant correlation between rising interest rates and falling gold prices. While monetary policy may influence gold markets, there are many other factors that affect the direction of precious-metals prices.
Okay, say the interest rate on a treasury note rises to 50%. You have a bunch of gold. Do you:
Keep all the gold because the link between interest rates and gold is an "unsubstantiated legend"?
--or--
Trade at least some of your gold for treasury notes to capture the higher interest rate?
The paper you are citing has numerous flaws, such as already assuming as true what it is trying to prove: "The US dollar index is obviously influencing gold prices" (page 1). I'll have more to say on it later.
@Overdate said:
Okay, say the interest rate on a treasury note rises to 50%. You have a bunch of gold. Do you:
Keep all the gold because the link between interest rates and gold is an "unsubstantiated legend"?
--or--
Trade at least some of your gold for treasury notes to capture the higher interest rate?
The paper you are citing has numerous flaws, such as already assuming as true what it is trying to prove: "The US dollar index is obviously influencing gold prices" (page 1). I'll have more to say on it later.
The scenario you cite is an abnormal economic condition, probably an economic crisis of some sort. In such situation nothing is predictable or reliable.
I'm not an economist and don't know anything about the dollar index. In my simply mind I see this increase in gold, silver, milk, bread, eggs and everything else as a weakening of the dollar. The U.S. debt is out of control and no one, including countries that have been financing our debt, are under the illusion Congress is going to do anything about it. As a precious metal owner I like $2350 gold and $28 silver but as an American I hate what it means for our country. PMs as insurance is great but the utility of insurance only comes into play after a disaster. We're headed for a disaster.
The longer I live the more convincing proofs I see of this truth, that God governs in the affairs of men. And if a sparrow cannot fall to the ground without His notice is it possible for an empire to rise without His aid? Benjamin Franklin
dollar index is a weighted index of exchange between the dollar a 6 different currencies. the dollar index can move sideways, as it has since the beginning of 2023, and the dollar can erode through inflation. i agree on that
you ever see "the big short?" at the end some small players on the short were excited about scoring and the guy that helped them score chastised them for the excitement because what it meant for the country. that's us right now
@Overdate said:
Okay, say the interest rate on a treasury note rises to 50%. You have a bunch of gold. Do you:
Keep all the gold because the link between interest rates and gold is an "unsubstantiated legend"?
--or--
Trade at least some of your gold for treasury notes to capture the higher interest rate?
The paper you are citing has numerous flaws, such as already assuming as true what it is trying to prove: "The US dollar index is obviously influencing gold prices" (page 1). I'll have more to say on it later.
The scenario you cite is an abnormal economic condition, probably an economic crisis of some sort. In such situation nothing is predictable or reliable.
I was using an extreme example to point out the obvious: when interest rates rise, dollars become more attractive relative to gold. When the interest rate on treasury securities rose from zero to 4.5%, I’m sure quite a few people bought t-bills or bank CDs rather than gold (which they would have otherwise bought if interest rates had remained at zero).
A monthly dataset from 1994 to 2024 shows a slight negative correlation (-0.178) between the U.S. dollar index and the price of gold. But the dollar index itself is at 104, the same as it was at the beginning of 2000 when gold was sitting at $284. Obviously this weak correlation is transient in nature and does not hold up over the long term.
BARRON'S had Louise Yamada, a technical analyst since the 1970's who focuses on gold and PMs, with some bullish quotes. $2,500-$2,600 target this year.
Comments
me... bwhahaha....
Any chance you can post context? Every time you put a link it tries to send me to Bulgaria Hedge which most would never click on. Starting to think not only do you spend a bunch of time there but perhaps you are a rep? The "Legendary" Turd ferguson perhaps? Hope I'm wrong. Au, she certainly appears to be signaling rough seas ahead. RGDS!
Yes…nice to be in the gold game lately.
MY GOLD TYPE SET https://pcgs.com/setregistry/type-sets/complete-type-sets/gold-type-set-12-piece-circulation-strikes-1839-1933/publishedset/321940
Now over $2300.> @derryb said:
Why can't it be the US Dollar index going down?
LOL The Metal of Kings is far outpacing the USD. Just like it did 2009-2011. USD is historically strong. God Bless America! RGDS!
Sorry to rain on your parade but record gold prices tell us all is not well with America's economic outlook. Gold is the canary in the coal mine. God will reward those who see this and are correctly prepared for it.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Current spot price of all precious metals is the starting point to pricing products made from those metals. Spot + premium is the market price.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
.> @derryb said:
What does record stock market prices tell us? Or how about record residential real estate prices? Has God bestowed his blessing on those who own stocks and real estate?
Knowledge is the enemy of fear
I addressed those items over in the stock and real estate forums. I believe the discussion here is about gold.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
And discussion of God belongs in a gold forum?
H Y P O C R I S Y
Gold is finally catching up to other assets. Yay!!!
Knowledge is the enemy of fear
What does record stock market prices tell us? Or how about record residential real estate prices? Has God bestowed his blessing on those who own stocks and real estate?
No different than Weimar.
I knew it would happen.
Blitzboy brought him into the conversation ("USD is strong! God Bless America."). I simply followed up with who God will reward. I know you think you are God, but there are other ones.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Gold might change hands and price but I still can't get my friends to change their minds.
The U.S. dollar index measures only the dollar against a basket of other currencies. Inflation is worldwide, including the U.S. dollar.
My Adolph A. Weinman signature
True, however, the USD index is highly inverse correlated to the price of gold, so on days like yesterday when the index has a big pullback it's typical to see the price of gold run. The gold price movement is most likely not due to a huge rush of gold buying.
In January 1974, more than 50 years ago, the U.S. dollar index was 105.9 (it's currently 104.06).
In January 1974, the price of gold was $130 per ounce.
Doesn't look that inverse correlated to me.
My Adolph A. Weinman signature
Information about the REAL condition of the U.S. economy has been out for a while. Why the sudden (last couple of weeks) house in the gold price to almost daily record highs?
Does this chart change your mind?
All time high in Canadian dollars too.........$3100.00
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
Not really. Draw a straight line from the start of the blue line to the end. Then draw a straight line from the start of the gold line to the end. Explain the difference.
My Adolph A. Weinman signature
It's a correlation not a fixed relationship. In general, if you look at the large movements of the USD index going down, you see the POG going up, and vice versa.
Didn't say it was a fixed relationship, but the fact that gold went up 17 times while the dollar index barely budged should give one pause.
Also, a granular examination of that chart reveals that there are many instances of weak or nonexistent inverse correlations. 2010, 2015 and 2022-to-present-day for instance. There are others.
My Adolph A. Weinman signature
Misinformation is more like it. Does anyone seriously believe that the cost of living has gone up only 20% since the start of Covid 4 years ago? Mine has increased a lot more, and I'm a homeowner.
My Adolph A. Weinman signature
Irregardless the price of gold, it's relationship with the dollar index is typically inverse (negative) over time.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Peter Schiff: Gold Is Telling Us The Fed Is Wrong
I stick with my decades long proclamation that gold price is a result of faith in the currency it is being priced in.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
It means there are additional market dynamics that affect the price.
For any commodity there are of course market dynamics that influence the price that can overcome the currency index that the commodity is priced in. But if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship.
The original point I made is that with the USD index falling almost 1% in the past few days is pushing gold, silver, and other commodity prices up. That by itself could explain the increases the last few days better than speculating about an increase in buying. An increase in buying would typically result in an increase in premiums. I don't have any data on that.
It could. Here's another reason: because U.S. assets are the best in the world. You think people want their money with Putin or the Chinese Communist Party ?
Rich people aren't stupid.
What I see is that the "Gold Up, Dollar Down" relationship doesn't hold over all time periods.
Keep in mind that as the global reserve financial currency, the supply of dollars must be LARGER than domestic demand and by necessity deflate over time.
One upside for me is that absolutely no one has asked to return any of the gold coins I've sold recently.
One downside is that I've sold a number of gold coins recently.
"if you could eliminate market dynamics, the price relationship would be a perfectly inverse relationship."
At the end of June 1995, the dollar index was 81.71 and the price of gold was $387.60.
Since then, the dollar index has gone up 27% and the price of gold has gone up 592%..
Does this mean that there is actually a strong positive correlation between the dollar index and the price of gold, or that somehow a 29-year run of "market dynamics" caused a negative relationship to be hidden?
I'm not saying that the correlation is positive or negative, I'm saying the dollar index is a measure of the dollar against other currencies, period, and cannot properly be used as an inverse proxy for gold.
"Market dynamics" can be used as a catch-all to explain anything, but in reality it explains nothing.
My Adolph A. Weinman signature
Your chart only goes up to 2007. If you replace it with a chart from 2007 to present day, both the dollar index and the price of gold are up, and the relationship of the two is positive.
As I mentioned above, "I'm not saying that the correlation is positive or negative, I'm saying the dollar index is a measure of the dollar against other currencies, period, and cannot properly be used as an inverse proxy for gold."
My Adolph A. Weinman signature
Let me try to clear up the confusion regarding correlations!
If you want to determine whether two time series are correlated, you need to specify the time interval you are interested in. For example, is it daily, monthly, quarterly, or annual? This can make a big difference.
For example, suppose stock A and stock B behave as follows:
Stock A: always up 10 % in Q1 and Q3, always down 5 % in Q2 and Q4.
Stock B: always up 10 % in Q2 and Q4, always down 5 % in Q1 and Q3.
In this example, for quarterly correlations, Stock A and Stock B are inversely correlated.
However, both Stock A and Stock B each gain about 9 % annually. So, for annual correlation, they show 100 % positive correlation.
The chart that @derryb posted suggests that from 1975 - 2008, gold and the dollar were inversely correlated if you measure correlation over roughly 2 year intervals.
(which interval you specific will depend on what you are trying to understand; for example, what type of trading strategy you may want to implement)
Of course not. It's not a perfect correlation.
It is a broad term but how else do you describe market events that affect supply and demand and drive prices beyond the effects of changes to valuation of the currency it's priced in? With a commodity like gold priced in US Dollars, there are really two things that affect price. 1) Changes to the value of the pricing unit (the USD) and 2) Changes to supply and demand. What you see on the chart is a combination of these two factors. Over periods of time where supply and demand are mostly balanced any movement is due to changes in the value of the dollar. Over periods of time where the value of the USD is relatively constant, changes in price are due to changes in supply and demand.
It's not me I'm still working on trying to secure an over spot priced ounce puck..
The relationship as I said, over time (including up to present time "is typically inverse." Yes, there are some short periods where there is a direct relationship, but historically the relationship is a good measure of how fiat currency is dying and gold is "insurance."
The charts of currency/gold relationships of numerous countries also do show that the currency is an inverse proxy for gold.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
The topic under discussion is the dollar index in relationship to gold, not the dollar itself. The dollar index has remained in a tight channel over the past 50+ years, while gold has soared.
To keep the conversation on point, we need to be talking about the same relationship.
My Adolph A. Weinman signature
If you agree that the dollar index cannot be used as an inverse proxy for gold, then this discussion is effectively over.
As to your second point, there is really only one thing that affects the dollar price of gold, and that's the second thing you describe, changes to supply and demand of the currency. Your number two point directly leads to your number one point, changes in the value of the pricing unit in terms of gold. Value is determined by supply and demand. In the rare case in which the value of the pricing unit in terms of gold is unilaterally changed by government decree, as occurred under Roosevelt in 1933, there is still only one thing that affects the price, and that is the first thing you describe, changes to the value of the pricing unit in terms of gold. This leads directly to changes in supply and demand for dollars, as people adjust to the increase or decrease in the number of units of the currency required to obtain a given amount of gold. Once the currency has no backing, then changes to supply and demand for both gold and the dollar become the only determinants of changes in value of gold in terms of the dollar.
My Adolph A. Weinman signature
OK, but you still can't ignore the fact that when the USD index moves significantly it is almost always associated with an inverse move in the price of all things priced in USD. Key word is "almost always" because yes there are exceptions where supply and demand overwhelm the currency effects.
Not really. If I understand your response right you are associating demand for US dollars with demand for gold but they are separate markets. In the US, fed policy and central bank lending policies affect demand for USD significantly along with factors like money velocity in the economy, not the government. Although the government pretends that the federal reserve is a government entity, it is not. Thus an interest rate announcement can cause the USD index to move which then results in a change in the price of gold, corn, pork bellies, etc.
No, it is not “almost always associated with an inverse move in the price of all things priced in USD.” It is most strongly associated with goods that are imported, for obvious reasons. Domestically produced goods that are consumed in the U.S. are typically little affected.
>
U.S. dollars and gold are not separate markets, they are linked. The two are competitive with each other as forms of money. If the Fed raises interest rates, it becomes more attractive to hold dollars in a money market account or treasury bond as compared to gold. The reverse is also true.
My Adolph A. Weinman signature
Real Residential Property Prices for United States FRED
https://fred.stlouisfed.org/series/QUSR628BIS
Not the best looking chart
In what way is it "not the best looking chart"?
Knowledge is the enemy of fear
.
High housing prices plus higher interest rates results in more debt servitude.
.
They haven't been for 50 years thanks to Nixon.
You seem to subscribe to some of the unsubstantiated legends about this topic.
https://www.investopedia.com/articles/investing/100915/effect-fed-fund-rate-hikes-gold.asp
You might want to do more research, like read this paper:
https://library2.smu.ca/bitstream/handle/01/26107/Shen_Zhengyuan_MRP_2014.pdf?sequence=1&isAllowed=y
Okay, say the interest rate on a treasury note rises to 50%. You have a bunch of gold. Do you:
--or--
The paper you are citing has numerous flaws, such as already assuming as true what it is trying to prove: "The US dollar index is obviously influencing gold prices" (page 1). I'll have more to say on it later.
My Adolph A. Weinman signature
The scenario you cite is an abnormal economic condition, probably an economic crisis of some sort. In such situation nothing is predictable or reliable.
I'm not an economist and don't know anything about the dollar index. In my simply mind I see this increase in gold, silver, milk, bread, eggs and everything else as a weakening of the dollar. The U.S. debt is out of control and no one, including countries that have been financing our debt, are under the illusion Congress is going to do anything about it. As a precious metal owner I like $2350 gold and $28 silver but as an American I hate what it means for our country. PMs as insurance is great but the utility of insurance only comes into play after a disaster. We're headed for a disaster.
dollar index is a weighted index of exchange between the dollar a 6 different currencies. the dollar index can move sideways, as it has since the beginning of 2023, and the dollar can erode through inflation. i agree on that
you ever see "the big short?" at the end some small players on the short were excited about scoring and the guy that helped them score chastised them for the excitement because what it meant for the country. that's us right now
I was using an extreme example to point out the obvious: when interest rates rise, dollars become more attractive relative to gold. When the interest rate on treasury securities rose from zero to 4.5%, I’m sure quite a few people bought t-bills or bank CDs rather than gold (which they would have otherwise bought if interest rates had remained at zero).
A monthly dataset from 1994 to 2024 shows a slight negative correlation (-0.178) between the U.S. dollar index and the price of gold. But the dollar index itself is at 104, the same as it was at the beginning of 2000 when gold was sitting at $284. Obviously this weak correlation is transient in nature and does not hold up over the long term.
My Adolph A. Weinman signature
Touched $2,384 today. Holding in $2,360's.
BARRON'S had Louise Yamada, a technical analyst since the 1970's who focuses on gold and PMs, with some bullish quotes. $2,500-$2,600 target this year.
Currently $2352 in the real world. High of $2365 today. RGDS!