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About That Supposed Correlation Of The U.S. Dollar And Gold...

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The supposed correlation of the U.S. dollar and gold is not visible in the 5-year charts.

 
One of the most widely accepted truisms in what passes for our financial media is that the dollar and gold are correlated: when the dollar weakens, gold rises, and when gold rises, the dollar declines.
 
Nice, except this vaunted correlation isn't remotely visible in the charts. Let's have a look. Here is the 5-year chart of the DXY Dollar Index, the most widely quoted measure of the U.S. Dollar:
 
 
And here is a 5-year chart of GLD, a proxy for gold:
 
 
I've marked the charts up seeking the sort of correlation that is accepted with near-religious faith and come up with near-random fluctuations. Let's start with the basics of correlation:
 
1. Do the peaks and troughs align? No, they don't. If gold and the DXY were correlated, we'd expect gold to bottom when the dollar peaked and the dollar to hit its lows at gold's peak. Instead, we find gold was rising when the dollar hit its last peak in mid-2010.
 
At gold's peak, the DXY was around its previous lows hit in 2008 and 2009. At the dollar's previous low in 2008 at 72, GLD was around 100; at the dollar's next low in late 2009 at 74, GLD was around 110. At the low in 2010 at 73, GLD was 150.
 
Conclusion: the peaks and troughs do not align--not even close.
 
2. Do the trends up and down align inversely? In other words, when gold is rising, is the dollar declining, and vice versa? Nope. The supposedly inversely correlated DXY and GLD have risen in tandem for several significant stretches of time.
 
We can play mind-games and claim the correlation inverted during these periods, but what would we base this claim on? Why did the correlation invert during these periods?
 
3. Were major uplegs/downlegs matched by similar percentage moves in the other index?If there was any sort of real correlation, we would expect to see a 30% rise or fall in one align with a similar-sized inverse move in the other.
 
For example, gold dropped by 30% since October 2012, yet the DXY rose a mere 5% in that period, crossing a price line it has crossed 9 times before.
 
When the DXY rocketed up 20% from late 2009 to mid-2010, we'd expect gold to plummet by 20% in the same timeframe. Instead, gold rose in tandem with the dollar.
 
4. If one has climbed by 70% since late 2008, the other should decline by roughly 70%.Instead, the dollar is back where it was in late 2008 at 84, a price level it has crossed 10 times since late 2008.
 
Gold has risen 70% from its late-2008 level. How are these dramatically different price movements correlated?
 
Conclusion: there is no correlation between gold and the U.S. dollar index. Not even close.The two move independently; any apparent correlation is semi-random signal noise. They are not on a simplistic see-saw.
 
In my view, this reflects the complex dynamics at work in pricing gold and the U.S. dollar:
 
 
 

 

 

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Mon, 07/08/2013 - 10:18 | 3730577 fasTTcar
fasTTcar's picture

The only correlation that I see is that I am using my dollars to buy gold.

Mon, 07/08/2013 - 10:22 | 3730590 Spider
Spider's picture

Very needed point!

On that note, us common folks can help the cause and break the banks by taking control of the silver market - an interesting concept and much needed today for silver investors:

http://www.communitysynergy.com/subscribe/silver_pledge_site.html

Mon, 07/08/2013 - 10:46 | 3730640 BaBaBouy
BaBaBouy's picture

The CORRELATION Is That The US Manipulates GOLD Down, And The Paper Fiats USD Rises And Looks Strong And Healthy (A La Fairytale).

It Has Worked Up To This Point.

The Uninformed Sheeple Believe It And Still Live By It.
It Will Not Last.

Meanwhile The Non-paper GOLD Supplies Continue To Be Shipped To ASIA etc...

AS Evidenced By JPM/Brinks Vaults, Comex And ETF's ...

Mon, 07/08/2013 - 11:11 | 3730779 Stuck on Zero
Stuck on Zero's picture

The correlation between the dollar and gold is not in price but in quantity.  The more dollars out there the higher gold goes.  It's as simple as that.

 

Mon, 07/08/2013 - 11:37 | 3730809 LawsofPhysics
LawsofPhysics's picture

Gold/Oil is far more interesting when one considers the application of "mark to fantasy" and the lack of collateral relative to all the paper promises floating around.

Interesting tidbet.  I spoke with the CEOs of two prominent venture capital funds.  Both stated flatly that "gold is irrelevant in modern finance" and "silver will have more relevance because of the great use in manufacturing".

Yes, it true.  These ivy league insiders really believe the gold is irrelevant and they are in fact "chosen" people.

Hedge accordingly, as this ends as it always has, world war...

Mon, 07/08/2013 - 11:40 | 3730858 fonzannoon
fonzannoon's picture

Laws I hope if you decide to do business with those CEO's, even as a bluff at first, you make it clear that you prefer to be paid in gold.

Mon, 07/08/2013 - 11:42 | 3730864 Surly Bear
Surly Bear's picture

Looks like a very long walk.

Mon, 07/08/2013 - 11:47 | 3730874 LawsofPhysics
LawsofPhysics's picture

I am okay with "favors" too.  The movie The Godfather is an essential part of my understanding of basic economics as well...

Remember what this is really about Fonz, power and control over real resources, period.

In the end, nothing else matters.

Mon, 07/08/2013 - 11:41 | 3730859 MachoMan
MachoMan's picture

Induction (history/statistics) does not necessarily have anything to do with the present situation.  I'm not sure that these things end in world war anymore...  at least not in the same ol' overt way...  everything is by proxy now...  wars that in yesteryear we didn't call world wars.  I'm also really doubting the propaganda machine at this point...  we're pretty long in the tooth of the war on terror.  Even if they trot out that TWA flight 800 was shot down by an Iranian missile, I'm not sure we can get enough public buy-in to go...  then there are the resource constraints...  then there is the collusion level among all world powers (there isn't actually a dispute)...  [as can be seen from the Snowden incident, despite said other powers attempting to save face].

That's not to say that it can't happen, just that induction is academically lazy. 

Mon, 07/08/2013 - 11:45 | 3730868 LawsofPhysics
LawsofPhysics's picture

War is a mess, period, be it by proxy or otherwise.  The bottom line is that the world has far too many liabilities relative to the available resources, and that which cannot be sustained, won't be.  

Mon, 07/08/2013 - 12:25 | 3731007 Kirk2NCC1701
Kirk2NCC1701's picture

It also has WAY too many people making a claim (or trying to) to all these finite resources.

It's a zero sum game, and we should expect a super-massive correction to the global pop. Especially now that tech and machines can do so much for the lifestyle of the rich & powerful.

More than one if these types have told me that "A pop of around 2B can maintain its great lifestyle for centuries. The rest of the current pop is just wrecking the planet" was the expression used.

p.s. The Elite have NO intention of depopulation via nukes, as they don't plan to shit in their own nest. Rather, it will be via GMO viruses (viral cold wars) and sterilization via GMO food. Note that cheap food for the masses is mostly GMO.

Mon, 07/08/2013 - 12:34 | 3731035 LawsofPhysics
LawsofPhysics's picture

p.s. define a GMO plant.  I farm almost 30,000 acres.  Many are heirloom plants, but we catalog mutations all the time.  Tell me, if a mutation occurs that make some plants more drought- or pest- tolerant and I decide to propagate/breed those progeny, are they GMO plants?

This has been going on for hundreds of years by the way.  Stop over thinking things, you will either eat, or you won't as that which cannot be sustained, won't be, period.

Mon, 07/08/2013 - 14:24 | 3731404 Kirk2NCC1701
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Fair enough.  I use the term 'GMO' in the sense of modifying the genes in a hi-tech lab -- for a specific trait.  E.g. making a plant resistant to high doses of pesticide. Some biologists and geneticists are concerned about the long-term effects of these 'foods' on the human genome and its fidelity to reproduce w/o scary (Frankenstein) effects or w/o causing sterility.  Notwithstanding the host of other concerns associated with pesticides, fungicides, etc, on the ecosystem (frogs, bees)...).

As I recall, and I'd have to search for it, there was an article I read some months ago, where lab mice became sterile in the 3rd generation of consuming certain GMO soys.  That troubled me, as we drink soy milk, instead of cow milk.

Your last sentence rings true, as we find ourselves eating a mix of both "standard" as well as "organic" produce & meat.  We do avoid farmed fish though.  Like most people, our budget does not allow the 'luxury' of only high-end organic food.

Mon, 07/08/2013 - 15:50 | 3731670 MicroSecession
MicroSecession's picture

Agreed 100%.  Look at the foods that we are having massive allergic outbreaks to - either used in vaccines or GMO.

Also, most people are under the mistaken impression that mutations that occur in the wild are accidental, and therefore anything we introduce is therefore fine since it happens randomly in the wild anyway.  But in reality, the mutation process is fairly controlled.  There are many genes that are literally marked by the genome where they can be mutated, and, in many cases, *how* they should be mutated.

When we just inject these crops with new genes, we are going around their internal mechanisms, and the long-term effects biologically and ecologically simply aren't known.

Mon, 07/08/2013 - 18:10 | 3732140 MeelionDollerBogus
MeelionDollerBogus's picture

GMO:

in defiance of evolution, multiple species' genomes are merged into a single organism using a viral insertion vector.

The proteins transcribed from those DNA snippets may be unhealthy (e.g. Bt toxin) and the viral vector IS unhealthy (ruins your immune system since it is poorly understood and its purpose is to get itself IN at any cost).

In the last several hundred years this has never, ever happened.

Mon, 07/08/2013 - 18:08 | 3732134 MeelionDollerBogus
MeelionDollerBogus's picture

Incorrect.

All viral weapons attack all parties no matter what - the wind & water are not isolated systems.

In fact the elites would much rather 10 billion or more, so long as they live short lives & can't spread their shit & pollution very far because they don't have things like cars, only bikes, and don't have cities, only shanty-towns just outside the factories they serve in for the duration of their life-spans.

Mon, 07/08/2013 - 18:05 | 3732123 MeelionDollerBogus
MeelionDollerBogus's picture

Induction requires recursion. It wasn't used here. Fractals use induction. When properly applied it has incredible ability to form the right equations matching the shape of an object, region or many interacting rates of change.

Again, it wasn't even used here.

Mon, 07/08/2013 - 12:33 | 3731031 Seer
Seer's picture

"silver will have more relevance because of the great use in manufacturing"

Ask them if they've ever heard of the phrase "Can't push on a string," or, if they're aware that the number of people on food stamps in the US is at an all-time high.  I suppose it would be too much to ask them to look over their shoulders at what's happening in China...

My brother runs around with the "professional" crowd.  As a sideline he'd sell commercial real estate.  All the inside information was available, of course.  After stating that I was going to hold off buying property until prices came down I was told by my brother that housing prices won't go down.  He bought property in Arizona back around bubble-pop time (not sure if it was before or after) so that he could play golf in his retirement.  And I waited and then bought property (Ag land) more cheaply and am going to try and farm until I drop dead...  Any one of these kinds of folks show up begging for food I will just inform them that there IS NO food shortage, that all is well and that they can run along...

Mon, 07/08/2013 - 12:36 | 3731043 LawsofPhysics
LawsofPhysics's picture

+1, yes, fuck em.  Just be sure you have a dependable tribe to defend your property.

Mon, 07/08/2013 - 14:26 | 3731096 Kirk2NCC1701
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The correlation that I'd like to see, is how much you could have made by listening to ZH since its inception, versus listening to the mainstream investment advice, I.e. buying into the stock market. I honestly don't know what that correlation is, but would like to.

The proof is in the results/ pudding.

Anyone? Charles? Tyler?

Mon, 07/08/2013 - 10:46 | 3730664 SafelyGraze
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the dollar is not correlated with gold or with anything else

over the past 100 years as the number of dollars has increased, the price of gold and other assets has gone up and down

the reason is that, just like dollars, gold and other assets continue to be created at exponentially increasing rates

this is because there is an endless supply of gold and other assets

assets like dollars

which is what makes the dollar so strong

the more you create, the more valuable each one becomes

it's just basic economics

Mon, 07/08/2013 - 11:11 | 3730780 alien-IQ
alien-IQ's picture

"the more you create, the more valuable each one becomes"

 

uh....????????......//////......????????.......what???????????????

 

Mon, 07/08/2013 - 11:27 | 3730818 LawsofPhysics
LawsofPhysics's picture

"the more you create, the more valuable each one becomes" - completely ass backwards moron.

Go ahead, flood the market with anything and just watch what happens to price (it will crash).

that  is basic eCONomics.

Mon, 07/08/2013 - 11:28 | 3730822 Agstacker
Agstacker's picture

 there is an endless supply of gold and other assets

 

What are you smoking?

Mon, 07/08/2013 - 12:21 | 3730995 alangreedspank
alangreedspank's picture

I think this was sarcasm guys...

Mon, 07/08/2013 - 12:45 | 3731072 TPTB_r_TBTF
TPTB_r_TBTF's picture

 

 

There are innumerable amounts of Gold and Minerals(oil is a mineral)

under the ice of Greenland and Antartica. 

And all we have to do to get to them

is to find way to speed up global warming.

Mon, 07/08/2013 - 17:59 | 3732109 MeelionDollerBogus
MeelionDollerBogus's picture

w t f.

Oil is not a mineral.

Minerals can be around or immersed in liquid hydrocarbons but minerals are ROCKS. Crystals. Salts.

The ignorance is astounding.

Mon, 07/08/2013 - 11:34 | 3730831 hootowl
hootowl's picture

Question for any genius that sees it:

Would I be better served by purchasing one, 1 oz. gold coin per year,....or purchasing sixty -two, 1 oz. U.S. Mint silver eagles per year?.....at current prices.

Mon, 07/08/2013 - 12:52 | 3731093 TPTB_r_TBTF
TPTB_r_TBTF's picture

well i sure ainT no genius,

 

but if you reveal to me the gold/silver ratio for any given date in the future,

i can probably answer your question.

Mon, 07/08/2013 - 17:55 | 3732098 MeelionDollerBogus
MeelionDollerBogus's picture

That's what this is for.

http://flic.kr/p/f17z1s

and this http://flic.kr/p/f5bHkJ (entire bull market gold vs silver scatterplot)

Mon, 07/08/2013 - 11:41 | 3730860 FreedomGuy
FreedomGuy's picture

I am guessing you made a typo on that last sentence.

The supply of both can increase which in theory would keep the value somewhat constant. However, gold and dollars have many sources of demand and can move independantly.

My bottom line is that if you look, gold was $35/oz in 1971. Today it has "crashed" down to $1200. Which one has actually gained value over time?

Second, if you found a Civil War shipwreck and it had both currency and gold in the hold, which would you want to have today?

I rest my case.

Mon, 07/08/2013 - 12:35 | 3731038 Seer
Seer's picture

I'll add this for you (others seem to have not taken it as being implied):

</sarc>

Mon, 07/08/2013 - 14:38 | 3731448 BigJim
BigJim's picture

I think you might want to put a </sarc> tag on that one

Mon, 07/08/2013 - 10:21 | 3730597 Pladizow
Pladizow's picture

"Conclusion: there is no correlation between gold and the U.S. dollar index"

On the 5 year chart, but what about longer time periods?

Mon, 07/08/2013 - 10:29 | 3730612 Spider
Spider's picture

People have to remember that the USD index is basically Euro, Yen, and Pound.  If the dollar strengthen it strengthens against THOSE currencies - but gold can strengthen against all the currencies

Mon, 07/08/2013 - 12:27 | 3730855 akak
akak's picture

People also need to rememeber that fundamentally, the US Dollar Index is an outdated and woefully flawed metric of ANYTHING, much less of the actual and absolute value (purchasing power) of the US dollar.  Comparing one constantly and continually depreciating fiat currency against a small basket of several other equally continually depreciating fiat currencies is a fool's errand at best, and yet more insidious pro-fiat, pro-status-quo propaganda at worst.

Mon, 07/08/2013 - 12:39 | 3731056 Seer
Seer's picture

Best-looking horse at the glue factory...  Contexts.  Fundamentals.  Premises...

Tue, 07/09/2013 - 01:39 | 3733311 Colonel Klink
Colonel Klink's picture

Did we switch subject to John Kerry?

Mon, 07/08/2013 - 10:48 | 3730688 moonstears
moonstears's picture

I think I read that some oft quoted asshole once said "in the 'longer time periods' we're all dead."/sarc

Mon, 07/08/2013 - 12:02 | 3730924 Silveramada
Silveramada's picture

...You simply cannot correlate fake money with real money

 

http://zysites.com/silververitas/

look at the daily moves/premiums/inventories in the pm's wholesalers world

Mon, 07/08/2013 - 17:30 | 3732021 jerry_theking_lawler
jerry_theking_lawler's picture

wrong. correlation is not causation.

 

you are using your $FRNs to buy gold because your $FRN are worthless. thats not correlation, that is causation.

Tue, 07/09/2013 - 15:48 | 3735015 papaclop
papaclop's picture

It is also fun to use JP Morgan's 0%cash access checks to buy gold and silver. They can be repaid using Uncle Ben's funny money.

Mon, 07/08/2013 - 10:20 | 3730585 SheepDog-One
SheepDog-One's picture

Must Buy.....moar.....goalds.....

Mon, 07/08/2013 - 10:59 | 3730729 Sudden Debt
Sudden Debt's picture

you  chinese?

Mon, 07/08/2013 - 10:20 | 3730591 KnightTakesKing
KnightTakesKing's picture

What's the statistical (R-squared value) correlation between the two? Article did not mention this. Kinda weak analysis, ya think?

Mon, 07/08/2013 - 10:29 | 3730614 socalbeach
socalbeach's picture

Math is not Charles' strong suit.

Mon, 07/08/2013 - 11:13 | 3730785 Quaderratic Probing
Quaderratic Probing's picture

The relationship that matters is the numbers of gold buyers can only decrease as the value of the USD declines. People rioting because they cant afford food cant afford gold. If you have gold and your paycheck is worthless you will trade your gold for a turnip to feed your family even if the market says its worth $15000 per Oz.

The coming collapse in the Bond markets will crush the stock,CRB and housing markets the deflationary effect will push the USD sky high.

China learned banking from the Lehman school... stupid is as stupid does

Charles if you see this how about stock / bond relationship over this century. How often are both at record highs together? I bet only now.

Mon, 07/08/2013 - 12:37 | 3731048 LawsofPhysics
LawsofPhysics's picture

"The coming collapse in the Bond markets will crush the stock,CRB and housing markets the deflationary effect will push the USD sky high." - 

You must be an optimist, because no society/currency has ever collapsed/died because their purchasing power was too strong.

Mon, 07/08/2013 - 12:48 | 3731082 Quaderratic Probing
Quaderratic Probing's picture

The end game of the high USD will be the ability to buy every money making asset on the planet at fire sale prices, congradulations America you win again.

Betting against America is a losers game, they are the House

Mon, 07/08/2013 - 12:57 | 3731106 LawsofPhysics
LawsofPhysics's picture

Define "America", since you refer to USD/FRN I presume you meant to say "The Federal Reserve", since you refer to "buying assets at fire sale prices" with FRNs.

"Betting against The Fed is a losers game, they are the House"  - fixed.

Mon, 07/08/2013 - 17:51 | 3732086 MeelionDollerBogus
MeelionDollerBogus's picture

Wrong.

That would be Russia, China and Canada. Murrica only has weapons to try to take things. Murrica will not have a powerful currency to do the purchasing you describe.

Mon, 07/08/2013 - 12:59 | 3731112 Seer
Seer's picture

Hey!  Just play along!  Now then, look at all the pretty unicorns...

But seriously, a strong USD would kill US businesses (exporters).  US trade deficit has been horrible with a weaker (than the suggested "stronger") USD.

I'll have to agree that at some point too few of something can make that something of little value (very small trade circle), but, clearly, too much of something decreases the value of that something (though for a short time it can bubble up real good, only to be followed by a spectacular plummet).  What WORKS is stability, and this massive shifting of currencies signals anything BUT stability: if your key trading partners' currencies go unstable then YOU are not going to be stable.

The signal to noise ratio is intensifying, with noise increasing; but, the signal (gold) is still there.  Up to this point the System has run on fiat, in which case it is fiat that is the thing that will suffer the most as the System increasingly encounters the wild fluctuations that are commonplace with any System that is going unstable.  The only way to remove the instability is to create a single worldwide currency, and I'm NOT thinking that any existing fiat is going to land that leading role: I also don't believe that any new fiat currency would do it either, though I'm sure that there are efforts at pushing it (which will only, as it should be, fail).

Mon, 07/08/2013 - 13:21 | 3731143 Quaderratic Probing
Quaderratic Probing's picture

What does America export? Apple stuff made in China? Manufacturing is only 12% of GDP now. But Input costs for all industry would fall as USD rises. All food inputs would fall, more spendable money for Americans or profit for companies both are good.

Mon, 07/08/2013 - 17:50 | 3732083 MeelionDollerBogus
MeelionDollerBogus's picture

Silly Rabbit, Murrica exports drone-munitions and depleted uranium shells (slighly used).

Mon, 07/08/2013 - 17:44 | 3732063 MeelionDollerBogus
MeelionDollerBogus's picture

Agreed. I don't have the data-set in front of me right now otherwise I'd do it myself. I do this frequently for gold vs silver over multiple time frames, such as this one http://flic.kr/p/f4cm89

Mon, 07/08/2013 - 10:20 | 3730592 SilverIsKing
SilverIsKing's picture

There will someday be a very high correlation.  When the dollar collapses, gold will inversely shoot to the moon.

Mon, 07/08/2013 - 10:59 | 3730727 T-NUTZ
T-NUTZ's picture

the /DX  will never collapse.  keep your eye on the ball.

Mon, 07/08/2013 - 11:29 | 3730830 Panafrican Funk...
Panafrican Funktron Robot's picture

In the interim, as a non-dipshit that thinks currency hedges are pretty important when considering wealth preservation, I like the fact that gold doesn't have a strong correlation with other currencies.  I don't want it to track the USD/EUR/JPY/RMB, unless one of those currencies has a direct gold backing.

Mon, 07/08/2013 - 10:22 | 3730594 Divine Wind
Divine Wind's picture

 

 

Truths like this are why we all love ZH, but KTK makes a good point.

 

 

Mon, 07/08/2013 - 10:21 | 3730599 BadDog
BadDog's picture

Everything is discombobulated.

Mon, 07/08/2013 - 10:25 | 3730606 Magnum
Magnum's picture

The relationship between gold and oil is more interesting.

Mon, 07/08/2013 - 10:37 | 3730639 ParkAveFlasher
ParkAveFlasher's picture

+1 for suggesting a meatier topic ... with geopolitical and historical dimensions on longer and more powerful and more subtle wavelengths.  The ancient Central and Western Asia trading empires didn't get to be Central and Western Asia trading empires by trading potential energy (oil) for symbolic energy (credit).   

Mon, 07/08/2013 - 11:28 | 3730823 LawsofPhysics
LawsofPhysics's picture

Bingo, the game remains the same, power and control over real resources.

Mon, 07/08/2013 - 13:15 | 3731155 Seer
Seer's picture

Yeah, that was why I was arguing against all the silly notions that the PIIGS would continue to fly...

And as I'd been saying, Canada, US and Russia are the only true powerhouses, as they have an array of resources (which, will only hold up for so long in the face of growth).  Japan?  It's an island country that relies on exports and has NO energy resources.  Germany?  Same thing.  China? Really, when USTs go to zero and exports tank how the hell are they going to supply their energy requirements?

THE reason why the US plays global cops is so that its trade partners can have lower oil prices so that they have disposable income with which to buy US products.  Oh, and it's also great business for the MIC!

Mon, 07/08/2013 - 17:41 | 3732052 MeelionDollerBogus
MeelionDollerBogus's picture

The inroads China has made in Africa tells me they are preparing. Doesn't mean they are ready, or will ever be ready, but the attempt has been initiated.

Mon, 07/08/2013 - 10:26 | 3730608 Dr. Engali
Dr. Engali's picture

Did somebody say GOLD?....Bitchez!

Mon, 07/08/2013 - 10:42 | 3730654 kito
kito's picture

hey doc, have you seen fonz, im only 750 points from my italian sub..with a cookie...and an extra large sugary drink......................

Mon, 07/08/2013 - 10:47 | 3730661 Dr. Engali
Dr. Engali's picture

What no fries? He is floating around here some place.

 

Edit.....Found him. 

Mon, 07/08/2013 - 10:44 | 3730663 fonzannoon
fonzannoon's picture

I'm here bud, and I have great news for you, you seem to have mistaken our bet. We originally were talking about 16k but when we made the bet the dow was closer to 15k. So the end of the year target we set was 15k. So you are actually a few hundred points in the green,

If you buy a 32 oz soda on my credit card and bloomberg has me arrested I want you to know I will be upset about this whole thing.

Mon, 07/08/2013 - 10:29 | 3730617 greatbeard
greatbeard's picture

Ok, the correlation between gold and the dollar, since Obama's election and Volker's influence, has been broken.  Mission accomplished.  As long as you have a life like stuffed canary in the mineshaft, everything is just fine.  Continue digging men, everything is safe.

Mon, 07/08/2013 - 10:55 | 3730621 IridiumRebel
IridiumRebel's picture

What the gold haters never say is what will happen when our reserve currency status gets dumped for a possibly gold backed RMB. It is coming. Where will gold be then? Our reserve status will be dumped. What replaces it is the question, but all of the swaps with RMB are increasing while the dollar is being dumped more and more. Answer me that.

Mon, 07/08/2013 - 10:59 | 3730726 StarTedStackin'
StarTedStackin&#039;'s picture

Haters are mostly ignorant fucks with ZERO understanding of history and economics.

Mon, 07/08/2013 - 11:32 | 3730834 Quaderratic Probing
Quaderratic Probing's picture

1907 Crash we were on the Gold standard, dollar tied to Gold caused the crash. The San Fransico fire damage could not be covered because there was not enough Gold available.

Mon, 07/08/2013 - 12:31 | 3730878 IridiumRebel
IridiumRebel's picture

Gold standard does not mean we are immune to crashes, booms and busts.....

...and it's more about lost reserve currency status than papering over stuff. We saw last week that China will allow things to take their natural course even if painful.

Mon, 07/08/2013 - 14:27 | 3731029 Kirk2NCC1701
Kirk2NCC1701's picture

"Gold standard does not mean we are immune to crashes, booms and busts..."

Then what's the fucking point?

Mon, 07/08/2013 - 15:08 | 3731552 IridiumRebel
IridiumRebel's picture

Point is you cannot create money out of thin air.

Mon, 07/08/2013 - 17:37 | 3732042 MeelionDollerBogus
MeelionDollerBogus's picture

The point is to remove the power of one special privileged group to make infinite money at zero cost & jail you for doing the same.

It's not the boom+bust that's the problem, it's the criminal cartel mafia that is required to have a centrally controlled fiat currency as today.

Mon, 07/08/2013 - 12:08 | 3730942 StarTedStackin'
StarTedStackin&#039;'s picture

boom bust cycles are somewhat sinusoidal. and have always occurred.

Mon, 07/08/2013 - 12:24 | 3731003 Quaderratic Probing
Quaderratic Probing's picture

Not related to cycle simply a huge disaster the cost of could not be covered as there was no way to print over it.

The Panic of 1907..Robert F. Bruner

Mon, 07/08/2013 - 13:20 | 3731176 OneTinSoldier66
OneTinSoldier66's picture
Economic Cycles Before the Fed - Tom Woods

 

http://www.libertyclassroom.com/panics/

Mon, 07/08/2013 - 17:36 | 3732041 MeelionDollerBogus
MeelionDollerBogus's picture

Absurd. San Fran merely didn't have enough on offer to convince everyone holding gold everywhere in the country, much less the world. to pay for the repairs.

Why should they? Pay for your own city. if you can't afford it, MOVE.

Mon, 07/08/2013 - 23:07 | 3733070 Quaderratic Probing
Quaderratic Probing's picture

Even back then cities were built on bonds. City gone, bond worthless but thats someones collateral for other things. J P Morgan in big trouble.....

Mon, 07/08/2013 - 10:40 | 3730631 moonstears
moonstears's picture

"Currencies (dollar)are shed and floating feathers from on high. At some points they variously catch an updraft, and suspend in mid air or float back up a bit. Gold is the goose egg sitting in a high nest, stable and on a high tree limb." Moonstears 1:1

"Feathers must always, eventually, reach the ground." Moonstears 1:2

Mon, 07/08/2013 - 10:35 | 3730633 tmosley
tmosley's picture

They only correlate when the currencies that comprise the DXY are as good as gold.  That is to say, never.

No, the TRUE value of the dollar is in the things it can buy.  As such, the true price of the dollar should be expressed as the inverse of the CRB (or something along those lines).

If you invert that value, of course, you have the CRB, which correlates extraordinarily well with gold (and shows that it is not gold that is volatile, but the dollar and other fiat currencies): http://3.bp.blogspot.com/-7WZ63z5m7VE/UXAZwozt35I/AAAAAAAANiA/fLhb0luDu7...

The chart also shows that gold leads the CRB, which indicates (to me at least) that inflation hits the gold market before it spreads to other commodities.

Mon, 07/08/2013 - 10:35 | 3730637 DonutBoy
DonutBoy's picture

The dollar index is not the dollar.  The article asserts that DXY and AU are uncorrelated.  That's as may be - but the title of the article is wrong prima facia.  The correlation of the dollar and gold is completely dependent on the choice of measures for the dollar.  If that choice is commodity-based rather than fiat-currency based (DXY) the dollar and gold are strongly and inversely correlated.

Mon, 07/08/2013 - 11:24 | 3730811 ronin12
ronin12's picture

Exactly - the "Dollar" and the "Dollar Index" are completely different things.

 

Mon, 07/08/2013 - 17:33 | 3732029 MeelionDollerBogus
MeelionDollerBogus's picture

And yet all traders, including all the traders on here, have constantly harped how the 'strong dollar' correlates to the 'weak gold price' refering to DXY index numbers.

Come on guys, CHS called you out.

It's Fight Club. Everyone gets to step in the ring and sometimes, even CHS can knock your nose loose.

Mon, 07/08/2013 - 10:36 | 3730638 Sleepless Knight
Sleepless Knight's picture

Either you believe in gold and buy or you dont its that simple.

Mon, 07/08/2013 - 10:39 | 3730643 Long-John-Silver
Long-John-Silver's picture

The bottom for paper gold is zero and it will soon attain that valuation. Good luck buying physical gold with dollars or any other fiat currency when that happens.

Mon, 07/08/2013 - 10:46 | 3730679 Quaderratic Probing
Quaderratic Probing's picture

The futures market in Gold is paper and will always be there

Mon, 07/08/2013 - 11:20 | 3730803 tmosley
tmosley's picture

Only those things that have already existed forever have a strong probability of continuing to exist forever.  There weren't any commodity exchanges anywhere until the mid-1800's, and the COMEX was established in 1933, and then they didn't focus on metals until the 70's.  

But I'm sure your bellyfeel is doubleplusgood.

Mon, 07/08/2013 - 12:10 | 3730947 StarTedStackin'
StarTedStackin&#039;'s picture

I agree, paper will always be there.......

Mon, 07/08/2013 - 10:47 | 3730666 Dr. Engali
Dr. Engali's picture

Why do I need gold when Ron Baron says the DOW will be at 60,000 in twenty years?

 

http://finance.yahoo.com/news/dow-hit-60-000-20-124549767.html

 

 

Maybe it's because bread will be $300 a loaf.

Mon, 07/08/2013 - 10:47 | 3730683 Levadiakos
Levadiakos's picture

I buy dollars

Mon, 07/08/2013 - 11:29 | 3730829 Agstacker
Agstacker's picture

If you are referring to these...

 

http://en.wikipedia.org/wiki/American_Silver_Eagle

 

Then so do I.

Mon, 07/08/2013 - 10:47 | 3730684 orangegeek
orangegeek's picture

Not related?  Guess again.

 

Hmmm. Posted this back in April.

 

http://bullandbearmash.com/chart/spot-gold-monthly-inverse-relationship-...

 

There is always lead and lag, but the USD inversely correlates with Gold.

Mon, 07/08/2013 - 10:59 | 3730717 Bay of Pigs
Bay of Pigs's picture

You've been shown your error yet continue to maintain your view.

What is your bias against gold anyway?

Mon, 07/08/2013 - 11:05 | 3730759 StarTedStackin'
StarTedStackin&#039;'s picture

He's living in the past, back when market forces controlled the FREE market economy.

Mon, 07/08/2013 - 11:58 | 3730909 akak
akak's picture

One can always count on OrangeNadler for some mindlessly conventional, blinkered, head-in-the-sand comment with a gratuitous slam against gold and an idiotic defense of the US dollar.

Mon, 07/08/2013 - 11:01 | 3730735 StarTedStackin'
StarTedStackin&#039;'s picture

Yep, and you can predict the stock market using charts now that the Obowel Movement is money printing...... uh huh........many resist giving up the old ways.

Mon, 07/08/2013 - 10:52 | 3730705 aleph0
aleph0's picture

What the hell has short term T/A got to do with 6000 years of physical gold ?
T/A is just a tracking of the past & short term manipulations of the paper markets . 
... & because BigMoney uses it ...  it becomes self fulfilling.
No mention of the decoupling of the Fiat Financial System from the real world.
... which is what Gold and other real assets are all about.
Sorry Charles  , I expected better from you on this one.

Mon, 07/08/2013 - 12:47 | 3731081 Winston of Oceania
Winston of Oceania's picture

Did he change his blog to Of Two Simple Minds? (his and whoever buys this crap)

Mon, 07/08/2013 - 10:54 | 3730716 eddiebe
eddiebe's picture

There is one correlation: Central banks hate gold. There.

Mon, 07/08/2013 - 11:07 | 3730761 hootowl
hootowl's picture

Tyler;

Did the word MANIPULATION fall out of that recently-acquired hole in your head?

Why study just 5 years, why not 5000 years? .....Include some data before the evil fiat banksters and other greedy satanic misanthropes acquired the means to dip their demonic paws into the honey pot?

Mon, 07/08/2013 - 17:28 | 3732015 MeelionDollerBogus
MeelionDollerBogus's picture

w t f.

Reading comprehension is a useful skill.

Correlating, proving or disproving, gold to a fiat currency means you have to measure as far back as both co-exist.

I think you know 5000 years ago no USD existed.

Mon, 07/08/2013 - 11:06 | 3730766 Temporalist
Temporalist's picture

Incorrect.  Central banks LOVE gold hence they own it and spend countless sums to create vaults and protect it as well as use their gov brances to have it "liberated".  They just make it seem like they hate it to convince the masses that it's bad.

Mon, 07/08/2013 - 11:45 | 3730870 Hobbleknee
Hobbleknee's picture

They also trick people to trade in their gold for funny money.

Mon, 07/08/2013 - 12:04 | 3730933 eddiebe
eddiebe's picture

Hmmm, it would seem to me that when you have the ability to print money, you would hate the ancient relic.

Mon, 07/08/2013 - 13:09 | 3731138 TPTB_r_TBTF
TPTB_r_TBTF's picture

if you could print money,

 

would you then hate gold?

 

Or would you buy moar?

Mon, 07/08/2013 - 15:10 | 3731564 DosZap
DosZap's picture

There is one correlation: Central banks hate gold. There.

 

Odd, as they seem to stockpile it with ABANDON.

Mon, 07/08/2013 - 10:56 | 3730719 Haole
Haole's picture

Interesting interview with Paul Craig Roberts:

 

https://www.youtube.com/watch?v=AyO-xR6ZW20#at=699

Mon, 07/08/2013 - 10:58 | 3730721 Levadiakos
Levadiakos's picture

Paulson's PFR gold fund fell 23% in June, down 65% in 2013.. One hit wonder.

Mon, 07/08/2013 - 11:04 | 3730756 alien-IQ
alien-IQ's picture

when pricing becomes arbitrary, prices become meaningless.

Mon, 07/08/2013 - 11:11 | 3730781 Lmo Mutton
Lmo Mutton's picture

Well if goald leads commodities i like the last leg down in the goald chart.

Mon, 07/08/2013 - 11:49 | 3730883 Meat Hammer
Meat Hammer's picture

Come on Tylers!  This article smacks of filler to get internet clicks (it worked on me, lol).  Me see word GOLD, me click.

I come to this site to learn (and yuk it up with you magnificent bastards). 

 

Mon, 07/08/2013 - 11:52 | 3730891 NoWayJose
NoWayJose's picture

There is also little correlation between QE and gold prices, yet the media hawk that too. The only numbers I am interested in is the $17 trillion national debt, the $1 trillion plus being added each year, and the inability of either Democrats or Republicans to cut any spending. When that bubble pops we will wake up one morning like the people in Argentina, Vietnam, or Venezuela and discover that the US Dollar is worth 45% of what it was worth the day before. On that day your stack will become even more precious.

Mon, 07/08/2013 - 12:18 | 3730977 shovelhead
shovelhead's picture

Funny,

My 2 lbs. of pork chops become 3 lbs. when the butcher puts his thumb on the scale...

Am I not reading the runestones correctly? Why am I reading runestones anyway?

I'm not a suspicious type, but I'm beginning to think the thumb has something to do with the price...

Mon, 07/08/2013 - 12:31 | 3731024 fasTTcar
fasTTcar's picture

All it means is that your ration of 3 lbs. has been increased to 2 lbs. this month comrade.

Mon, 07/08/2013 - 12:23 | 3730999 Trampy
Trampy's picture

any decent trading platform should let you plot the Pearson correlation cofficient.  See:

http://www.tradestation.com/education/labs/analysis-concepts/understanding-and-using-correlation-analysis

 --------------------------------

Background

Pearson’s correlation coefficient between two variables is defined as the covariance of the two variables divided by the product of their standard deviations:

“In the world of finance, correlation is a statistical measure of how two securities move in relation to each other. Correlation is computed into what is known as the correlation coefficient, which ranges between -1 and +1. Perfect positive correlation (a correlation coefficient of +1) implies that as one security moves, either up or down, the other security will move in lockstep, in the same direction. Alternatively, perfect negative correlation means that if one security moves in either direction the security that is perfectly negatively correlated will move in the opposite direction. If the correlation is 0, the movements of the securities are said to have no correlation; they are completely random. In real life, perfectly correlated securities are rare; rather, you will find securities with some degree of correlation" (Investopedia 2012).

 

Mon, 07/08/2013 - 12:28 | 3731018 Save_America1st
Save_America1st's picture

Dollar correlation?  I think we need people to stop correlating gold/silver with dollars.  It's about how many ounces you have stacked and can hold in your hands. 

Maybe we should correlate our ounces to Renminbi since it's looking like China is going to eventually back it by physical gold, thus crushing the U.S. dollar and all other paper fiat around the world.

The dollar/Renminbi exchange rate right now is 1:6.13

Maybe buying Renminbi wouldn't be a bad idear?  One of these days that ratio is going to be drastically to the flip side.  I have this sick feeling we'll be wanting to use their gold backed paper in America more than our failed devalued dollars one of these days in my lifetime. 

I'll just keep trading in the fiat for real phyzz until then though. 

Mon, 07/08/2013 - 12:38 | 3731050 alangreedspank
alangreedspank's picture

Try DXY vs "fixed basket of commodities" instead of picking out only one of them.

Mon, 07/08/2013 - 12:46 | 3731074 Kirk2NCC1701
Kirk2NCC1701's picture

I think its fair to say that a great number of ZH gold/PM lovers (myself included) were buying on the proclaimed inverse relationship between gold and the USD supply.

Time may prove us right in the 'long' run (whatever timeline that is), but it sure as hell ain't worth a hill of beans right now.

That's why many of us like to diversify. You'll want to hold real assets: Matter + Energy.

Mon, 07/08/2013 - 15:33 | 3731628 MeelionDollerBogus
MeelionDollerBogus's picture

Time will give you no such luxury. The DXY is rigged to weight inverse of the Euro. So how can gold go up in all currencies while euro is down and DXY is then up?
It happens but rarely. Each currency can be paired to another; gold is one of these currencies and can be priced in EACH of the others. A higher DXY implies only a lesser value in pairings of each of the others to USD, mostly weighted to EUR, and no reference to GOLD itself.
You may as well be looking at CAD/JPY to figure out what is USD/XAU (gold). It's pointless: it's the wrong pairing.

Mon, 07/08/2013 - 16:07 | 3731728 SilverMoneyBags
SilverMoneyBags's picture

The correlation is with OIL ie; black gold. 

Mon, 07/08/2013 - 17:22 | 3731983 MeelionDollerBogus
MeelionDollerBogus's picture

It's not. The DXY is an equation weighting fiat currency so the stronger the euro the weaker the dxy and the other fiats are presented with much smaller weight than the Euro.

Oil volume, price, capacity held anywhere or usage is not considered in the equation whatsoever.

http://scharts.co/12TFXp3

not correlated.

http://scharts.co/12TG2ZS that's DXY overlaid to SZO oil short ETN. No correlation.

Is hate borrow shtick from Boris but shtick is good for beat dead horse.
If not can read chart then explain why not can reads thermometer about globaling warmer "hoax".

Now even Boris and Bogus can is see Jack's complete lack of suprise.

Mon, 07/08/2013 - 17:17 | 3731973 MeelionDollerBogus
MeelionDollerBogus's picture

Would have been just as easy to use a scatterplot or overlay.

DXY overlaid with gold spot in the background:

http://scharts.co/1a6HQk4

Visibly not correlated.

http://scharts.co/1a6HYQR

this has the Horizons Beta Pro bear-gold fund vs DXY. Again, weak correlation.

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