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Repeat After Me: US Dollar Moves Are Irrelevant To The Price of Gold

Derek Wolfe

Updated: May 13, 2022

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Editor’s Note:

EDITOR'S NOTE: Here’s something that most of you might find confusing. When mainstream media talks about gold, it’s almost always in relation to a strengthening or weakening dollar. This comparison has become so frequent and common that it’s virtually become ingrained into how we think about gold’s value. Well, according to Mish’s argument below, this manner of assessing gold’s value is highly erroneous; the dollar’s fluctuations have no “real” impact on the price of gold, and the negative correlation between the dollar and gold isn’t even reliable. If this notion runs counter to how we think about the yellow metal, Mish offers a few more sobering and seemingly counterintuitive arguments. For instance, he argues that gold is NOT an inflation hedge. Rather, it’s a hedge against negative perceptions concerning central banks. Does this make sense? If you’re not already familiar with these arguments, we suggest you take the time to read and understand them. This article may be one of the most informative pieces you’ll ever read on gold role in the economy.

One of my readers recently commented that he did not like gold because of the strong dollar. So what? Dollar moves are irrelevant.

Dollar and Gold charts courtesy of StockCharts.Com annotations by Mish

Dollar and Gold charts courtesy of StockCharts.Com annotations by Mish

Dollar Movement is Irrelevant

"Gold is getting hammered by the rising dollar. Sinking like a rock!" said another reader.

Sinking like a rock. How funny. 

Repeat after me, US dollar moves are irrelevant to the price of gold over any meaningful time frame.

I drew a horizontal line with the US dollar index at 87.5 to get enough data points for comparison. If you prefer another level, be my guest and try it. 

Gold Prices at US Dollar Index Level 87.5

  • $500
  • $800
  • $1200
  • $1350
  • $1900

Gold was also at $1900 at an dollar index of 103. 

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