A Simple Relationship Between Gold, T-Bonds and the US$

by Steve Saville, The Speculative Investor
Gold Seek

A TSI subscriber recently reminded me of an indicator that I regularly cited in ‘the old days’ but haven’t mentioned over the past few years. The indicator is the bond/dollar ratio (the T-Bond price divided by the Dollar Index).

The bond/dollar ratio not only does a reasonable job of explaining trends in the US$ gold price, it does a much better job of explaining trends in the US$ gold price than does the Dollar Index in isolation. As evidence, here is a chart comparing the bond/dollar ratio (USB/USD) with the gold price followed by a chart comparing the reciprocal of the Dollar Index with the gold price. The first chart indicates a closer relationship than the second chart.

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