Gold and the Dollar and the 8-year cycle

Key points:

• Gold and the U.S. Dollar have a long history of being inversely correlated in terms of price movement
• Also, there has long been an 8-year cycle in terms of gold and dollar price movement
• Despite the massive rally in gold so far in 2025, we are still early in the latest favorable portion of the 8-year cycle for gold

Gold versus the U.S. Dollar

Let's get right to the heart of the matter and look at how price performance for Gold and the U.S. Dollar differed over each 8-year cycle starting at the end of 1976. 

The 8-year cycles we will examine include:

• 1976 through 1984
• 1984 through 1992
• 1992 through 2000
• 2000 through 2008
• 2008 through 2016
• 2016 through 2024

The latest cycle began at the end of 2024 and will extend through 2032. We also break each 8-year cycle into two halves:

• Months 1 through 48 tend to favor Gold
• Months 49 through 98 tend to favor the U.S. Dollar

That's the theory. Let's examine how things have played out in reality. (HINT: Pretty well.)

The first 4 years of the 8-year cycle

First, we will examine Gold and U.S. Dollar performance during each cycle's first 48 months (i.e., 4 years). The periods examined include:

• 1976-12-31 through 1980-12-31
• 1984-12-31 through 1988-12-31
• 1992-12-31 through 1996-12-31
• 2000-12-31 through 2004-12-31
• 2008-12-31 through 2012-12-31
• 2016-12-31 through 2020-12-31
• 2024-12-31 through 2025-09-30 (the test was cutoff at the end of September 2025)

The top clip in the chart below highlights the performance of Gold (black line) and Dollar (blue line)during these periods (inside the green boxes). The bottom clip shows the relationship between the two markets.

The chart below displays the hypothetical growth of $1 invested in Gold only during the abovementioned periods. The cumulative gain through 2025-09-30 is +4,627.7%. 

The following chart displays the same results on a logarithmic basis.

The chart below displays the hypothetical growth of $1 invested in the U.S. Dollar only during the abovementioned periods. The cumulative return through 2025-09-30 is -71.1%. This is a stark contrast to Gold's performance and clearly highlights the inverse nature of the relationship between the two markets.

The following chart displays the same results on a logarithmic basis.

The table below shows the performance of both markets during each four-year period tested above (Including the first nine months of the latest cycle that started at the end of 2024).

The last 4 years of the 8-year cycle

Next, let's examine Gold and U.S. Dollar performance during each cycle's last 48 months (i.e., 4 years). The periods examined include:

• 1980-12-31 through 1984-12-31
• 1988-12-31 through 1992-12-31
• 1996-12-31 through 2000-12-31
• 2004-12-31 through 2008-12-31
• 2012-12-31 through 2016-12-31
• 2020-12-31 through 2024-12-31

The chart below highlights Gold and Dollar performance during these periods (inside the red boxes) in the top clip, and the relationship between the two markets in the bottom clip.

The chart below displays the hypothetical growth of $1 invested in Gold only during the abovementioned periods. The cumulative return through 2025-09-30 is -39.8%. 

The following chart displays the same results on a logarithmic basis.

The chart below displays the hypothetical growth of $1 invested in Gold only during the abovementioned periods. The cumulative return through 2025-09-30 is +223.2%.

The following chart displays the same results on a logarithmic basis.

The table below shows the performance of each market during each four-year period tested above.

Switching versus Inverse Switching

To further illustrate the difference in Gold and U.S. Dollar performance during the two halves of the 8-year cycle, let's consider the following two strategies:

Strategy #1: Holds Gold during the first 48 months and the Dollar during the last 48 months

Strategy #2: Holds the Dollar during the first 48 months and Gold during the last 48 months 

The chart below displays the hypothetical growth of $1 invested using Strategy #1. $1 grew to $152.82, or +15,182.2%.

On the other end of the spectrum, the chart below shows the hypothetical growth of $1 invested using Strategy #2. $1 declined -83% to $0.17.

What the research tells us…

There is a clear inverse relationship between Gold and the U.S. Dollar. There has also been a strong tendency for the first four years of each new 8-year cycle to favor gold and the second four years to favor the Dollar. Gold exploded during the first nine and a half months of the newest cycle that began at the end of 2024. It is now in the process of correcting. We cannot predict how far down the correction will go and how long it will last. In the interim, investors and traders need to manage risk ruthlessly. However, one should not lose sight that we are less than a quarter of the way into the latest 48-month favorable for Gold portion of the 8-year cycle. Once the current correction runs its course, we should not be surprised to see Gold resume an advance that could last several more years.