
Since mid-December 2024, the US Dollar Index and international gold prices have shown a trend of rising in tandem. This phenomenon breaks the traditional negative correlation pricing model between the two, indicating a profound change in their operating logic. The US Dollar Index benefits from strong US economic performance, a slowdown in the Federal Reserve's easing policies, and policy expectations from the Trump administration, while international gold prices are driven by demand for safe-haven assets and central bank gold purchases.
Analysis of the Traditional Dollar and Gold Price Correlation
After the collapse of the Bretton Woods system, despite the enhanced non-monetary nature of gold, the US Dollar Index remains an important influence on international gold prices. Generally, gold prices fall when the dollar appreciates and rise when the dollar depreciates. This is because the dollar, being the main currency for pricing gold, directly affects gold prices through its value fluctuations. Additionally, the dollar and gold serve as alternative global reserve assets. When the attractiveness of dollar assets increases, gold's value-preservation function and appeal decrease.
The Federal Reserve's monetary policy is also a significant influence on both. When the policy is loose, excess liquidity leads to a weaker dollar and higher gold prices; when it is tight, liquidity decreases, raising the US Dollar Index and putting pressure on gold prices. These factors collectively shape the negative correlation between the dollar and gold prices.
Weakening of the Current Negative Correlation between the Dollar and Gold Prices
Since 2019, driven by demand for safe-haven assets, allocation, and reserves, gold has entered a bull market, while the US Dollar Index has also shown strong performance. The phenomenon of both rising and falling together has increased, indicating a shift in the traditional pricing logic. The underlying reason is not a decoupling of the dollar and gold, but a change in their operating logic.
- Drivers of the US Dollar Index: The US Dollar Index is more influenced by economic and policy differentials. For example, strong US economic performance, a slowdown in the Federal Reserve's easing measures, and expectations of the Trump administration's "America First" policy all support the US Dollar Index.
- Drivers of Gold Prices: International gold prices reflect more of the demand for safe-haven assets and central bank reserves. Uncertain Trump administration policies, geopolitical tensions in the Middle East, and emerging market central banks increasing gold reserves all support gold prices.
Recent Performance of the Dollar and Gold Prices
Since September 2024, the US economy has continued to perform strongly, widening the economic gap with Europe and highlighting policy differences, pushing the US Dollar Index steadily upward. At the same time, a surge in gold purchases by emerging market central banks has increased demand for gold, strengthening market confidence. In the combined effects of safe-haven sentiment and reserve demand, gold prices have run strongly.
Although a stronger dollar has a negative impact on gold prices, this effect is limited. In the absence of restrictions due to a stronger dollar, international gold prices might have risen even more. The current simultaneous rise of the dollar and gold prices aligns with the macro environment, and such phenomena are expected to become increasingly frequent.
Gold Price Outlook: Rally Not Over
In the coming months, the uncertainties of US political and economic conditions and expectations of a restructuring of the global monetary order will continue to favor precious metal prices. In the short term, gold prices may continue to stay strong. Looking ahead to the first half of 2025, the macro environment will mainly support a rise in gold prices, while in the second half, as policies and the economy stabilize, gold prices might face a correction.
It is expected that international gold prices will fluctuate between $2500 and $3000 per ounce and could test the resistance level of $3000 to $3100. Support is focused on the $2500 to $2300 range.
In the complex global economic and political landscape, the operating logic between the US dollar and gold continues to adjust, and their negative correlation will continue to weaken, but the dollar's influence on gold prices cannot be ignored. Investors should closely track the Federal Reserve's policy movements and geopolitical changes to seize market opportunities.

