The recent surge up in the dollar has occurred as gold and commodities have plummeted. The first plot above shows the 65 day rolling correlation between gold (GLD) and the dollar index (DXY). The correlation is currently substantially negative. Note that when the correlation has been positive it has tended to mark pullbacks or consolidations in gold.
The second plot above shows the 65 day rolling correlation between a commodity fund (DBC) and the dollar index (DXY). The correlation has moved negatively during the dollar surge. Also notice that the correlation is relatively low compared to that of gold and the dollar.
Is the recent dollar strength enough to end the commodities bull market? Will the straight down decline of the commodities lead to yet another move up? Can short period correlations actually tell us anything?
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