Gold Bulls Warned as Dollar Bids Emerge
Gold prices have surged to fresh multi-month highs in Asian trade on Monday, but tentative signs that the US dollar may be trying to bottom provide a warning for bullion bulls.
The correlation matrix shows gold moving almost in lockstep with silver and copper over the past five days, with correlations of +0.93 and +0.90 respectively. Its positive relationship with Bitcoin has also strengthened noticeably to +0.63.
At the same time, gold's inverse correlation with the US dollar index (DXY) has fallen to -0.84, considerably stronger than its relationship with either nominal or real Treasury yields across the curve.
The DXY is attempting to bottom, with bids emerging below 98.75 around the 50% retracement of the January to June bull move. A dragonfly doji followed by a hammer after a pronounced bearish move warns of the potential for a squeeze higher ahead of Treasury Secretary Scott Bessent's announcement.
The technical picture for gold remains uniformly bullish, with the price breaking above its longer-term downtrend in July and reclaiming the 50, 100, and 200-day moving averages. The latest leg higher has taken gold to around $4,650 an ounce, a level that repeatedly acted as both support and resistance earlier this year.