Notice how the peaks and valleys in the gold price have been tracking the broader commodity sector fairly closely.
I should note that this particular commodity index does have a fairly excessive weighting in the energy complex ( well over 60%) so it stands to reason that movements in the crude oil, brent, gasoline, heating oil markets are going to exert a greater influence on this index than movements in the grains or the softs or the livestock markets, etc.
Even at that however, the link between the gold price and this index is fairly significant.
Here is another look at the same index, this time comparing it to the Dollar Index.
It is interesting to note that the overall commodity index tends to follow more of an inverse relationship to the Dollar, falling when the Dollar rises and rising when the Dollar falls. There are some periods however when the two seemed to actually move in sync, so the relationship is not perfect by any means. What I take away from this chart is that the norm is more of an inverse however.
It does look like since February of this year, that inverse relationship has been fairly tight however.
I come away from these charts believing that the relationships we have been watching for years now over here at this site are still worthwhile to monitor. If the Dollar is weaker, we should look, generally speaking, for the commodity indices to show some upward movement. If the Dollar is stronger, we should expect the opposite.
Then, if the commodity index is moving higher, gold should tend to track along with it. The opposite remains true.
We come back to that pesky Dollar thing again, no matter how we try to get away from it!
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