This evening, the DXY (the US Dollar index) dropped below 92 to a new 2+ year low. I recall the earlier days when we look forward to a lower DXY because it almost always mean a higher Gold Price. The inverse relationship of Gold to DXY is almost taken for granted. And here I am about to show you something peculiar.
From 1 June to 2 August when Gold was vibrant, a 3.7% drop in the DXY translated into an 11% gain in Gold (Inverse worked). Subsequent to Gold's peak in August, DXY dropped in August but so did Gold by 2.36x (Inverse failed). Then over the next 2 months from late August to end of Oct, DXY gained 0.7% and placed pressure on Gold which dropped 3.5% (Back to Inverse). From end of October to now, while the USD continued its decline, Gold followed suit , declining as well. But over the past week, the positive correlation has been startling - DXY only dropped 0.5% but Gold declined 6x more by 3%.
So what we're seemingly seeing is an unwinding of the gold premia , from Gold/DXY high of 21.7 to 19.75 and appears to be heading back towards 18.7 made on 1 June.
The concern is that when the dollar is weakening and gold is unable to capitalise on its weakness, when can it do so again? The declining trend in GOLD/DXY is indeed worrying. If we get a rebound in the dollar for whatever reason, Gold may stumble even further. Or if the ratio does indeed retrace all the way back to 18.7, we could get $1700 @DXY losing another 1% to 91.
Column 1
Column 2
Column 3
Column 4
Column 5
Column 6
Column 7
Column 8
0
1 Apr 2018
1 June 20
2 August 20
23 August 20
26 October 20
20 November
26 November
1
GOLD (USD)
$ 1,419
$1,820
$ 2,028
$ 1,975
$1,906
$ 1,872
$1,815
2
DXY (USD INDEX)
91.84
97.00
93.43
92.37
93.04
92.39
91.91
3
Ratio GOLDXY
15.45
18.76
21.71
21.38
20.49
20.26
19.75
4
1/6 to 2/8
2/8 to 23/8
23/8 to 26/10
25/10 to 20/11
25/10 to 20/12
5
Gold Chg%
11.4%
-2.6%
-3.5%
-1.8%
-3.0%
6
DXY Chg%
-3.7%
-1.1%
0.7%
-0.7%
-0.5%
I have no interest to want to talk down Gold , on the contrary I hope Gold maintains $1800 , but the purpose of this thread is to share important insights, good and bad so everyone can be well prepared.
XY
