luke1827

The comparative strength or weakness of Gold vs. US Dollar

FX:XAUUSD   Gold/U.S. Dollar
In this study, I'm looking at the performance of gold             , in terms of percentage gains/loss compared to the performance of the US dollar             , tracked by the dollar index             ( DXY             ). As gold             moves inversely with the US dollar             , I inversed the DXY             to set a comparative benchmark, hence 1/DXY.

Please see notes on chart.
Ansari
2 years ago
many thanks,
very nice
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luke1827 PRO Ansari
2 years ago
Thanks!
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K155MY4R53
2 years ago
Brilliant work.
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luke1827 PRO K155MY4R53
2 years ago
Thanks!
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dp
2 years ago
Why this approach is better than just looking at the anti-correlation of XAUUSD and DXY?
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luke1827 PRO dp
2 years ago
Sorry dp, I'm not sure what you mean by anti-correlation. Do you mean charting XAUUSD against DXY directly and seeing the divergences?
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dp luke1827
2 years ago
Anti-correlation means negative correlation, sorry for that lingo -- its just negative value of correlation coefficient.

The problem is, if you draw correlation, say, XAUUSD and DXY, it's hard to say that most of the time they are negatively correlated -- like people often say "...dollar up, gold down; dollar down, gold up...' -- the correlation changes the sign over time.

What you are doing through looking at 1/DXY and XAUUSD correlation -- you are basically inverting dollar index. Because Dollar index is mostly dominated by EURO, one can use EURUSD in place of 1/DXY, so that inversion mechanism is more or less obvious. But as I previously wrote, I'm unable to find persistent (anti) correlation of currencies and commodities.

Basically my point is that inverting DXY doesn't give any new information in terms of correlation. Without inversion you get one sign, with the inversion -- another.

More important point is -- is it possible to say that in certain situations correlation works for some reason, and doesn't work in others?

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