Dollar Index and Gold: The Link Every Trader Should Know

Ever had a gold trade turn against you out of nowhere, only to find out later that the dollar had a big day? Gold and the US dollar often sit at opposite ends of a seesaw: when one goes up, the other tends to come down.

In this guide you'll learn what the US Dollar Index (DXY) is, how to read it, why gold usually moves against it, and how to check the dollar the right way before you trade gold.

What exactly is the Dollar Index (DXY)?

When someone says "the dollar got stronger", the first question is: stronger against what? The dollar can gain on the euro and lose ground to the Japanese yen on the same day. So we need one overall number.

The US Dollar Index, known by its ticker DXY, is that number. Think of the price index that tracks a weekly shopping basket: the price of milk alone tells you little, but the whole basket shows what is really happening to your grocery bill. DXY does the same job for the dollar against a basket of major currencies.

A few basics:

• It was first built by the Federal Reserve (the US central bank) in 1973, and today ICE (Intercontinental Exchange) calculates and maintains it.
• Its starting point is March 1973, when it was set at 100.
• According to ICE's methodology, the index is recalculated every second during the trading day.

The six-currency basket and its weights

DXY compares the dollar with six currencies, but they don't count equally:

• Euro: 57.6%
• Japanese yen: 13.6%
• British pound: 11.9%
• Canadian dollar: 9.1%
• Swedish krona: 4.2%
• Swiss franc: 3.6%

Look at the euro: more than half the basket. In practice, DXY mostly tells you what the dollar is doing against the euro. That's why, when EURUSD rises, DXY usually falls, and the other way around. The pound adds another 11.9%, so for UK traders GBPUSD often tells a similar story.

One more surprise: ICE says these weights have stayed the same since the start. So the currencies of some of today's biggest US trading partners, like China and Mexico, aren't in the basket at all. That's one reason the Fed also publishes a Broad Dollar Index, which weights 26 currencies by actual trade. In its 2026 weight table, the euro area makes up about 21%, Mexico about 14.8% and China about 10.9%.

Bottom line: DXY is the most famous dollar number, but not the only one.

How to read the number

Reading DXY is simple:

• Above 100: the dollar is stronger against this basket than in March 1973.
• Below 100: it's weaker than back then.

For a trader, though, the level itself matters less than direction and speed. If the index climbs from 100 to 103 in a month, the dollar has gained about 3% on average against the basket. For a market like gold, that's not a small move.

You'll find DXY under that ticker on most charting platforms. Its futures contract trades on ICE under the symbol DX, about 21 hours a day.

Why does gold usually move against the dollar?

There are two main reasons.

1. Gold's price tag is in dollars

The world gold price is usually quoted in US dollars per troy ounce (about 31.1 grams). Now picture the dollar as a tape measure. If the tape shrinks, the same sofa suddenly measures longer. When the dollar weakens (the tape shrinks), one ounce of gold shows a bigger dollar number. When the dollar strengthens, the opposite happens.

There's a second side to this. A strong dollar makes gold more expensive for anyone paying in pounds, euros or yen. Some of them buy less, and that puts pressure on the dollar price of gold.

2. Gold pays no interest

Put money in a savings account or US Treasury bonds and you earn interest. Gold pays nothing. When the real interest rate (interest minus inflation) in the US goes up, holding gold has a bigger opportunity cost: you give up the interest you could have earned. Higher rates also tend to make the dollar more attractive. Result: dollar up, gold under pressure.

An article in the journal of the LBMA (London Bullion Market Association) backs this up: the textbook view is that rising real rates are bad news for gold, as long as nothing else changes.

How strong is the link?

In that same LBMA article, the correlation between gold and a dollar index made of the euro, yen and pound was measured at minus 0.75 for 2018 up to the time of writing, which is a very strong inverse link. But the article also flags a subtle point: in 2014 to 2018 data, DXY itself had a weaker correlation with gold than some other dollar indices. Watch DXY alone and you may miss part of the picture.

How it connects to other markets

The dollar sits at the center of global markets. According to a Federal Reserve note, the dollar made up about 58% of the world's disclosed official foreign exchange reserves in 2024, and in April 2022 it was on one side of roughly 88% of all currency trades. So when the dollar moves, a lot moves with it:

• Dollar and gold: usually opposite directions.
• Dollar and EURUSD: since the euro is more than half of DXY, they're close to mirror images.
• Dollar and interest rates: Fed decisions and what markets expect from rates move the dollar, and through it, gold.
• Gold and central banks: per the same Fed note, gold now makes up over 23% of official reserves, up from under 10% in 2015. Most of that jump came from gold's price climbing more than 200%; the amount of gold actually held grew far less.

A real-world example: 2024

If all you know is "gold moves against the dollar", 2024 will confuse you. According to the World Gold Council, gold rose 25.5% that year and set 40 new record highs, the top one being $2,777.80 per ounce on 30 October. But the World Gold Council puts most of that rise down to strong buying by central banks and investors, plus higher geopolitical risk. A weaker dollar and lower bond yields helped only during some periods.

The lesson: the dollar is one of gold's engines, not its only engine. Correlations are not fixed. They can weaken for a while or even flip.

A worked example with simple numbers

This example is hypothetical, and the numbers are rounded to keep things easy.

Say a buyer in London wants one ounce of gold:

• Gold price: $2,200 per ounce
• GBPUSD: 1.375 (one pound = $1.375)
• Price in pounds: 2,200 ÷ 1.375 = £1,600

Now the dollar strengthens and GBPUSD drops to 1.25. Gold's dollar price hasn't changed:

• Price for the same buyer: 2,200 ÷ 1.25 = £1,760

Without gold rising a single dollar, it just got 10% more expensive for this buyer. If lots of buyers like her hold back, demand drops and the dollar price of gold comes under pressure. That's the mechanism that keeps the dollar-gold seesaw moving.

How does this help your trading? Say you have a long gold setup, but on the same day DXY shoots higher after a major US data release. You'd be walking into a headwind. You could wait for things to settle, or enter with a smaller position.

Common mistakes

• Treating DXY as "the whole dollar": more than half of it is the euro, and currencies like China's yuan and Mexico's peso aren't in it.
• Expecting a tick-by-tick mirror: the gold-dollar link shows up over days and weeks, not on every one-minute candle.
• Forgetting about fear: in stressful periods, gold and the dollar can both rise together.
• Trading on correlation alone: correlation is a helper, not your reason to enter. Stick to your own setup and stop-loss.
• Betting twice on one idea: buying gold while also selling the dollar against another currency is really one bigger bet on a weaker dollar.

Practical checklist

• Before a gold trade, I open the DXY chart on the same timeframe.
• I know whether DXY is trending up, down or moving sideways.
• I've checked the economic calendar for big US releases (rates, inflation, jobs).
• If gold and the dollar are moving in the same direction, I've looked for the reason (fear, news, central bank buying).
• I've added up the total risk of all positions that depend on a weaker dollar.

Frequently asked questions

Where can I see DXY?

On most charting platforms under the ticker DXY. If yours doesn't show it, look at the EURUSD chart upside down. The big picture looks similar, because the euro makes up more than half of the index.

Why do gold and the dollar sometimes rise together?

Because gold doesn't only listen to the dollar. In tense times, demand for gold as a hedge goes up, and heavy buying by central banks can push gold higher even when the dollar is strong. 2024 was a good example.

How many grams are in a troy ounce?

According to NIST (the US National Institute of Standards and Technology), one troy ounce equals 31.1035 grams. To get the price of one gram of pure gold, divide the ounce price by about 31.1. Keep in mind that 18-karat gold is only 75% gold, according to the same NIST table.

Is the Fed's dollar index better than DXY?

Neither is "better"; they do different jobs. DXY is the famous one and updates every second, so traders watch it most. The Fed's broad index weights 26 currencies by real trade, so it gives a fuller picture of the dollar's place in US trade.

Wrapping up

DXY is the dollar's average score against six major currencies, and the euro makes up more than half of it. Because gold is priced in dollars and pays no interest, it usually moves against the dollar. But that's a tendency, not a law: central banks, market fear and interest rates all play a part. Make a habit of glancing at the dollar before every gold trade. That one look can save you from plenty of surprises.

Want to learn this step by step, at your own pace? Check out our free courses and explore our pro tools in the software section.

Adapted from: ICE, Federal Reserve (weights table), World Gold Council, LBMA and NIST

Trading carries a significant risk of loss. This article is for educational purposes only and is not financial advice.