Gold (XAU/USD), DXY (U.S. Dollar Index), 10-Year Bond Yield, and Interest Rate Correlations
As of June 2025, the relationships between these assets reflect a mix of traditional dynamics and evolving market forces. Below is a breakdown of their correlations and current data:
1. Gold (XAU/USD) and DXY (U.S. Dollar Index)
Traditional Inverse Relationship: Gold is priced in USD, so a stronger dollar (higher DXY) typically makes gold more expensive for foreign buyers, reducing demand and lowering prices. Conversely, a weaker dollar supports gold prices.
Recent Anomaly (2023–2025): Geopolitical tensions (e.g., Iran-Israel conflict, U.S.-China trade disputes) and central bank gold purchases (notably by China and Russia) have driven simultaneous strength in gold and the dollar. For example:
Gold hit a record high of $3,500/oz in April 2025 despite DXY hovering near 98.43.
Central banks bought 1,037 tonnes of gold in 2024, offsetting typical dollar-driven headwinds.
The inverse correlation is reasserting as Fed rate-cut expectations grow, but geopolitical risks still support gold.
2. Gold and 10-Year Treasury Yield
Inverse Correlation Typically: Higher yields increase the opportunity cost of holding non-yielding gold.
Inflation Hedge Exception: When real interest rates (nominal yield - inflation) are negative or low, gold rises despite higher yields. For example:
10-year yield: 4.450% (June 2025)
U.S. inflation: 3.1% (May 2025) → real rate ~1.26%, reducing gold’s appeal but not eliminating it.
Current Driver: Market focus on Fed policy (potential cuts) and inflation persistence keeps gold supported even with elevated yields.
3. DXY and 10-Year Treasury Yield
Positive Correlation: Higher yields attract foreign capital into U.S. bonds, boosting dollar demand (DXY↑).
Divergence Risks: Geopolitical tensions can decouple this relationship (e.g., safe-haven dollar demand outweighs yield changes).
4. Interest Rates and Gold
Fed Policy Impact: Higher rates strengthen the dollar and dampen gold demand, while rate cuts weaken the dollar and boost gold.
2025 Outlook:
Fed funds rate: 4.25–4.50% (held steady in June 2025).
Geopolitical Risks: Safe-haven demand for gold and the dollar persists.
Real Interest Rates: Gold’s performance hinges on whether real rates stay subdued.
Central Bank Demand: Record gold purchases (1,200+ tonnes in 2024) provide structural support.
Conclusion
While traditional correlations between gold, DXY, and yields persist, structural shifts (central bank buying, geopolitical fragmentation) and evolving Fed policy are redefining these relationships. Gold remains bullish in the medium term.
WATCH MY GREEN BAR ZONE FOR BUY.
As of June 2025, the relationships between these assets reflect a mix of traditional dynamics and evolving market forces. Below is a breakdown of their correlations and current data:
1. Gold (XAU/USD) and DXY (U.S. Dollar Index)
Traditional Inverse Relationship: Gold is priced in USD, so a stronger dollar (higher DXY) typically makes gold more expensive for foreign buyers, reducing demand and lowering prices. Conversely, a weaker dollar supports gold prices.
Recent Anomaly (2023–2025): Geopolitical tensions (e.g., Iran-Israel conflict, U.S.-China trade disputes) and central bank gold purchases (notably by China and Russia) have driven simultaneous strength in gold and the dollar. For example:
Gold hit a record high of $3,500/oz in April 2025 despite DXY hovering near 98.43.
Central banks bought 1,037 tonnes of gold in 2024, offsetting typical dollar-driven headwinds.
The inverse correlation is reasserting as Fed rate-cut expectations grow, but geopolitical risks still support gold.
2. Gold and 10-Year Treasury Yield
Inverse Correlation Typically: Higher yields increase the opportunity cost of holding non-yielding gold.
Inflation Hedge Exception: When real interest rates (nominal yield - inflation) are negative or low, gold rises despite higher yields. For example:
10-year yield: 4.450% (June 2025)
U.S. inflation: 3.1% (May 2025) → real rate ~1.26%, reducing gold’s appeal but not eliminating it.
Current Driver: Market focus on Fed policy (potential cuts) and inflation persistence keeps gold supported even with elevated yields.
3. DXY and 10-Year Treasury Yield
Positive Correlation: Higher yields attract foreign capital into U.S. bonds, boosting dollar demand (DXY↑).
Divergence Risks: Geopolitical tensions can decouple this relationship (e.g., safe-haven dollar demand outweighs yield changes).
4. Interest Rates and Gold
Fed Policy Impact: Higher rates strengthen the dollar and dampen gold demand, while rate cuts weaken the dollar and boost gold.
2025 Outlook:
Fed funds rate: 4.25–4.50% (held steady in June 2025).
Geopolitical Risks: Safe-haven demand for gold and the dollar persists.
Real Interest Rates: Gold’s performance hinges on whether real rates stay subdued.
Central Bank Demand: Record gold purchases (1,200+ tonnes in 2024) provide structural support.
Conclusion
While traditional correlations between gold, DXY, and yields persist, structural shifts (central bank buying, geopolitical fragmentation) and evolving Fed policy are redefining these relationships. Gold remains bullish in the medium term.
WATCH MY GREEN BAR ZONE FOR BUY.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.