Why does the American dollar sometimes move in sync with gold?

[Igor Pereira]

Why Do American Dollar and Time Gold Climb Together?

Technical and Macroeconomic Analysis of Correlation Broken between USD and XAU/USD

By Igor Pereira – Financial Market Analyst the Junior WallSNYSE treet
ExpertFX School – Technical and Strategic Education for Professional Traders

---

Introduction

The inverse correlation between gold (XAU/USD) and US dollar (USD) It is a widespread idea in the financial markets. Under normal conditions, when the dollar is strengthened, gold tends to fall — and vice versa. This logic is rooted in the way gold is globally priced in dollars. However, this relationship is not constant, and there are times when both assets move in the same direction.

This article explores the seven main reasons which explain when and why the gold and the dollar rise or fall simultaneously, and what this reveals on the market sentiment, liquidity, inflation and global monetary policy.

---

1. Simultaneous Search for Refugee Assets

In moments of systemic crisisAs pandemics, wars or financial collapses, investors abandon risky assets and seek protection. Both the US dollar and gold are considered value reserves and safe havens — the first for its status as a global reserve currency; the second for its intrinsic value and monetary history.

Classic example:

COVID-19 (March 2020):
"> Gold rose as hedge against panic and liquidity.
The DXY (dollar index) also went up, reflecting leakage into liquidity in dollar.

In this scenario, the negative correlation between gold and dollar has been temporarily invalidated, since both served as global defensive assets.

---

2. Fed monetary policy inflation and expectations

When inflation accelerates faster than real interest risesgold is valued as a protection against the loss of purchasing power. At the same time, if the market anticipates that Federal Reserve will adopt a more hawkish posture, the dollar also strengthens.

Example:

2022 – Global inflationary supercycle:
"> Gold remained valued as protection against inflation.
The dollar rose with the expectations of aggressive high interest for the Fed.

In this context, the market has put into practice inflation risk and monetary tightening at the same time, causing synchronized movement between XAU and USD.

---

3. Global Shortage of Liquidity in Dollars

During credit or stress crises in the financial system, investors sell (including gold) assets to obtain immediate liquidity in dollar. It provokes Simultaneous drop in gold prices and USD valuation, even if the long-term trend of metal is high.

Example:

2008 crisis:
"> Gold fell short-term for forced sales.
Dollar shot with liquidity demand.

This dynamic reinforces the role of USD as global emergency relief currency, even at the expense of traditionally defensive assets.

---

4. Strategic Purchases of Gold by Central Banks

Aggressive increases in gold reserves by central banks (such as China, Russia, Turkey or Kazakhstan) create long-term structural demand, supporting the price of gold even in dollar valuation cycles.

Why does it matter?

• China and Russia They seek to reduce exposure to the dollar.

• Gold enters as an alternative to international ballast.

• This neutralizes the traditional inverse correlation.

The impact is more visible when there is geopolitical divergence or attempts at systemic dedollarization.

---

5. Technical Movements and Market Structure Breaks

The foundations do not always dominate the market. Technical breakouts, structural breaks, institutional liquidity and pending orders may cause Synchronized short-term movements between the gold and the dollar, momentarily ignoring the macroeconomics.

Example:

• Break of a institutional level of support/resistance

• Week opening with Liquidity impulsive gap

• Price handling during high impact events (Payroll, FOMC, CPI)

Institutional traders explore these moments to capture liquidity in both assets, resulting in temporarily correlated behaviors.

---

6. Connection with Real Interest Rates

Gold has an inverse relationship with Real interest rates (nominal interest discounted by inflation). When actual rates fall or become negative, gold rises, for its opportunity cost decreases.

If at the same time the Fed signals future monetary adjustments, the dollar can also rise, even without an immediate increase in interest.

Example:

"> Gold rises as real value protection
Dollar rises with perspective of preventive measures of the Fed

This synergy explains periods of joint valuation, even with apparently conflicting grounds.

---

7. Influence of Dollar Quoted Commodities

How gold is priced in dollar, movements in other commodities (such as oil and industrial metals) can impact both the XAU/USD quotation and the DXY index, especially when the market reprecises global demand for real assets.

Example:

"> Force the dollar through future contracts (WTI, Brent)
Impacts gold via correlated commodity channels

---

Conclusion: When Reverse Correlation Breaks

Although traditional logic suggests that gold and dollar move in opposite directions, several macroeconomic, structural and technical factors can be break this correlation.

Summary of the main scenarios in which gold and dollar rise together:

Scene	Effect
Global systemic crisis	Simultaneous search for refuge
Inflation + interest below inflation	Double Hedge against value loss
Liquidity stress	Asset leak for USD
Purchases from central banks	Continuous gold support
Technical Breakouts	Short-term alignment
Fall in real rates	Parallel valuation
Commodities pressure	Correlated channel transmission

Analyst Note: When both assets rise at the same time, this signals high risk on markets, and generally coincides with increased volatility, escape to quality and global stress in the financial system. For the professional trader, this type of behavior requires refined reading of macroeconomic context and strategic interpretation of institutional flow cycles.

---

By Igor Pereira
Financial Market Analyst
ExpertFX School – Deep Analysis. Elite strategies. Consistent Traders Training.