Study of DXY, Gold, and Fed Fund Rates using 200MA indicator
Black line: DXY (U.S. dollar index)
Green line: DXY 200 week moving average
Yellow line: GC (Gold futures)
Blue line: DFF (U.S. Federal Funds Effective Rate)
Since 1971 when U.S. dollar went off the gold standard, there have been 6 instances when the DXY crossed below its 200 week moving average while it was rising. At closing on 27 September 2024 was the 7th instance of this DXY crossing.
Of interest:
Performance of gold when DXY crosses below, until DXY reaches a local minimum. Results are highlighted in purple boxes.
Of the 7 instances, interest rates were rising in 4, flat in 1, falling in 1, and presumed to be falling in the current scenario. The only rising rate period was 1985-92, when gold had a very marginal 4% gain. This was notably on the backside of the 1970's high inflation period. Technically, gold showed gains in all but 1 of these historical periods, with 1994-95 showing a 2% loss.
Conclusions:
1) DXY trend reversal downward is not always, or often, associated with a U.S. interest rate cutting cycle nor is it strongly correlated with gold price gains.
2) The start of a U.S. interest rate cutting cycle is not predictive of gold price gains.
Green line: DXY 200 week moving average
Yellow line: GC (Gold futures)
Blue line: DFF (U.S. Federal Funds Effective Rate)
Since 1971 when U.S. dollar went off the gold standard, there have been 6 instances when the DXY crossed below its 200 week moving average while it was rising. At closing on 27 September 2024 was the 7th instance of this DXY crossing.
Of interest:
Performance of gold when DXY crosses below, until DXY reaches a local minimum. Results are highlighted in purple boxes.
Of the 7 instances, interest rates were rising in 4, flat in 1, falling in 1, and presumed to be falling in the current scenario. The only rising rate period was 1985-92, when gold had a very marginal 4% gain. This was notably on the backside of the 1970's high inflation period. Technically, gold showed gains in all but 1 of these historical periods, with 1994-95 showing a 2% loss.
Conclusions:
1) DXY trend reversal downward is not always, or often, associated with a U.S. interest rate cutting cycle nor is it strongly correlated with gold price gains.
2) The start of a U.S. interest rate cutting cycle is not predictive of gold price gains.
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