Since the Bombed Out Buck bottomed in Q4 and Gold-ilock’s expectations for “Gold $3000” topped, we have seen a very high inverse correlation between the price of the US Dollar Index and the price of Gold (see chart).
Gold topped on December 2nd at $1224 (see our note from 12/2 titled “Bubbly Gold: Selling Some”), and has since lost -8% of its value. Meanwhile the US Dollar Index has rallied +4% from her bombed out lows over roughly the same time period. That ratio of de-leverage to the gold price associated with USD strength is obvious. Today, the UUP (Dollar ETF) is +0.7%, while the GLD (Gold ETF) is -0.6%.
Last year we were very early in calling out the high r-squares between the USD and the SP500. In the last 3 months, those high r-squares have decayed, across multiple durations. High inverse correlations are never perpetual, but they are very powerful when they trend.
Since we are currently long UUP and short GLD in the Virtual Portfolio, we’ll be measuring the inverse correlation of Buck Up, Gold Down, very closely day to day. It’s still very powerful.
Keith R. McCullough
Chief Executive Officer