Data &
Technology
Research
Reports
Report Solutions
Reports Library
Actionable
Strategies
Free
Resources
Simple Backtest Calculator
Simple Seasonality Calculator
The Kelly Criterion Calculator
Sentiment Geo Map
Public Research Reports
Free Webinar
Pricing
Company
About
Meet Our Team
In the News
Testimonials
Client Success Stories
Contact
Log inLoginSign up
< BACK TO ALL REPORTS

Dollar momentum isn't stopping gold

Jason Goepfert
2020-02-20
The correlation between gold and the dollar is breaking down. The Relative Strength Index for the dollar has now pushed into extreme territory.

Dollar is no bug for gold

The dollar has a big impact on the price of gold, with a rising dollar being a headwind to rising gold prices. But not lately.

Over the past 3 months, gold has managed to rise along with the buck. The rolling 3-month correlation in their daily price moves has traditionally hung in negative territory, especially since 2002. Now, it has climbed to the highest since 2016.

Dollar gold correlation

Over the short- to medium-term, it was a better sign for the dollar than it was for gold (or the euro or commodities). A month after similar rises in correlation, gold averaged a return of only -0.9% while the dollar averaged a gain of nearly 1%. Stocks tended to hold up well, if we can assign any meaning to that.


Coding a trading strategy in 10 minutes

A lot of what we're focused on at SentimenTrader is giving users tools and information to sort through what is unfortunately a hype-filled industry. Much of what we're taught as investors and read in the media is either not helpful or outright deceptive.

So, we spend a lot of time doing "myth busting" types of analysis, since sometimes it's just as useful to know what doesn't work as what does (and even then, nothing is perfect). We have a custom Backtest Engine that allows any user to test virtually ever indicator we track, but sometimes you might want to do something more in-depth.

In those cases, using something like Excel can work. It's often quicker and more flexible, though, to program a model using code. In this video, we show how you can go from zero programming experience to coding a simple model for the S&P 500. 

Coding a trading strategy in python


Dollar driven

As noted above, the U.S. Dollar Index continues to trend higher, pushing its 14 day RSI to the highest level since mid-2018:

Dollar relative strength index (rsi)

As is usually the case, high momentum can be interpreted in 2 ways:

  1. The market needs to reverse
  2. The market will chop around for a while, then continue going in the direction of its previous trend

When the USD Index was at a 1 year high while RSI exceeded 76 in the past, the USD's returns over the next month were quite bullish. Momentum doesn't die that easily. 

Dollar rsi becomes overbought

However, returns over the next 2 months were weak, particularly if we exclude the many cases during the 1981-1985 USD bull market.

This is an abridged version of our recent reports and notes. For immediate access with no obligation, sign up for a 30-day free trial now.

We also looked at:

  • U.S. households have never been more confident in a rally over the next year
  • What happens after building permits surge
  • Several asian markets are seeing a jump in MACD buy signals
DATA &
TECHnologies
IndicatorEdge
‍
BackTestEdge
‍
Other Tools
‍
DataEdge API
RESEARCH
reports
Research Solution
‍
Reports Library
‍
actionable
Strategies
Trading Strategies
‍
Smart Stock Scanner
‍
FREE
RESOUrCES
Simple Backtest
Calculator
Simple Seasonality
Calculator
The Kelly Criterion
Calculator
Sentiment Geo Map
‍
Public Research Reports
‍
Free Webinar
COMPANY
‍
About
‍
Meet our Team
‍
In the News
‍
Testimonials
‍
Client Success Stories
Pricing
Bundle pricing
‍
Announcements
‍
FAQ
© 2024 Sundial Capital Research Inc. All rights reserved.
Setsail Marketing
TermsPrivacyAffiliate Program
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Testimonial Disclosure: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.