Relationship between dollar index and gold price

Historical Relationship between US dollar and gold

The braton forest system established in 1944 stipulates that the dollar is the most important international reserve currency.

The dollar is directly linked to Gold. currencies in different countries are linked to the dollar and can be exchanged for gold at $35 an ounce. This is what we call the "Gold Standard System". That is to say, the currencies of all countries are based on gold exchange. However, due to the revival of Europe and Japan, many countries used US dollars to buy gold; in addition, the Vietnam War in the 1960 s led to the deterioration of the US economic situation, the collapse of the braton forest system, and the IMF finally gave up the system.

Reverse trend analysis of dollar index and gold price

When the dollar index falls, gold is rising, while when the dollar index falls, it is often on the way, and gold is negatively correlated with the dollar for most of the year. Why can the dollar affect the price of gold so strongly?

There are three main reasons:

01. The dollar is the pillar of the current international currency system. The dollar and gold are the most important reserve assets. The strength and stability of the dollar weaken the position of gold as reserve assets and hedging functions.

02. The United States still accounts for 1/4 of the world's GDP, and the world's total foreign trade is the largest. The world economy is deeply affected. However, the price of gold is generally inversely proportional to the quality of the world economy.

03. The world's gold market is generally priced at the dollar, so the devaluation of the dollar will inevitably lead to a rise in the price of gold. For example, when the price of gold fell into a low position at the end of the 20th century, people threw out gold and maintained growth with the U.S. economy for 100 consecutive months. The dollar was closely related.

The above is the knowledge about the relationship between the dollar index and the gold price. For more information about the dollar index, please pay attention to the dollar index column in the foreign exchange Valley portal.