Dollar Gravity On Precious Metals

Now with that in mind let’s talk about Dollar gravity which I have attempted to visualize by showing you a GOLD:USD ratio (in blue) on top of just the continuous gold futures contract (in green). What you may notice is that the ratio has been dropping below gold over the past few years which means that gold in relation to Dollar strength is weaker than gold on its own.

I know this can be a bit confusing as futures contracts after all are quoted in Dollars, right? But recall that the Dollar index represents the strength of the Dollar in relation to other currencies. And if the Dollar strengthens then it obviously will impose a drag on commodities (as well as stocks) as you require less Dollars to buy the same amount.

Dollar Gravity On Precious Metals