How the US dollar index affects gold prices

Abstract

This paper tests how the US dollar index affects global gold prices. The data on US dollar index and gold prices was collected from the period 1995 to 2014. To examine how the US dollar affects the gold prices, this paper mainly employs the Augmented Dickey Fuller test, the Cointegration Test and the Error-Correction Model. The results of the empirical study show that the US dollar index is negatively related to global gold prices both before and after the 2007 financial crisis.