Long-Term Correlations Between The Dollar And Oil, Stocks, Bonds, Gold

The chart below shows monthly prices for the S&P 500 (red) and the Dollar Index (green) over the last thirty years. The four indicator windows show correlations between the Dollar Index and the S&P 500, US Treasury Bonds, Light Crude and Gold. I am using 12-month correlations with a 60-period moving average in red. This moving average smooths out the data series to give us an idea of the big underlying tendency. The red areas show when this long-term moving average is negative and the green areas show when it is positive.

First, note that stocks and bonds flip between periods of positive correlation (green) and negative correlation (red). Stocks are currently negatively correlated to the Dollar, and bonds are currently positively correlated to the Dollar. Keep in mind that these are monthly charts and very long-term perspectives.


The correlations between Dollar-Oil and Dollar-Gold are much stronger, and negative. The 12-month Correlation Coefficients fluctuate above and below the zero line, but the 60-month moving average is mostly negative. Oil and the dollar were positively correlated from 2000 to 2004, but this did not last long as the negative correlation returned. The relationship between gold and the Dollar is by far the strongest, and a strong Dollar is clearly hurting gold.


Courtesy of StockCharts.com

Receive these articles per e-mail

Subscribe for the free weekly newsletter and receive 3 papers about physical precious metals investing