Precious metals have been bearing the brunt of being the most underperforming asset class for over a year now. While we saw stocks and commodities rally, precious metals were moving sideways or undergoing correction. And this was regardless of where the US Dollar was headed!
But there’s a movement coming through in the precious metals, which is important to observe. We are here to do just that.
Traditionally speaking, the Dollar and Gold have moved in the opposite direction. They have an inverse relationship so to speak, and that is depicted by the chart below.
As can be seen in the image below, the US Dollar and Gold have a strong negative correlation. This is evidenced by the correlation coefficient in the bottom pane. While there are times when they move in the same direction, the traditional relationship catches up pretty soon.
Notice how when the indicator contracts, the negative correlation reduces. But the inverse relationship persists beyond short bursts of positivity.
Click on the chart to zoom in.
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