Why does gold fall when the dollar rises?

Partly arithmetic and partly demand. XAUUSD expresses one global gold price in dollars, so a stronger dollar mechanically lowers that quote even if metal demand is unchanged. A strong dollar also usually accompanies tighter US policy and higher real yields, which raises the cost of holding non-yielding gold.

Can gold and the dollar rise together?

Yes, and it happens regularly during haven episodes. Growth scares, credit events, geopolitical shocks and reserve-diversification waves can bid both assets at once. When that happens the usual inverse relationship stops being a useful cap on gold.

Should I watch DXY or the broad dollar index?

Use the Fed broad trade-weighted index for the regime read because DXY is dominated by the euro. Watch DXY intraday because that is what most order flow reacts to during the London and New York sessions.

How do I tell a dollar move from a gold move?

Check an XAU cross. If XAUEUR and XAUGBP are roughly flat while XAUUSD drops, the currency did the work. If gold is falling in every currency, the metal itself is being sold, which usually has more follow-through.

GOLD AND THE US DOLLAR

Name: XAUUSD month-end close vs broad US dollar index, 2015 to date
Creator: GoldHunts
License: https://creativecommons.org/licenses/by/4.0/

XAUUSD is a ratio: ounces priced in dollars. When the dollar strengthens against everything else, the same ounce buys more currency elsewhere and the dollar price of gold usually falls. On 140 months of GoldHunts data, monthly changes in the broad dollar index correlate with gold returns at r = -0.23.

XAUUSD is a ratio: one global gold price expressed in dollars. When the dollar strengthens broadly, the dollar quote for gold usually falls even when metal demand is unchanged.

GoldHunts measures the correlation between month-over-month change in the Federal Reserve broad dollar index (DTWEXBGS) and XAUUSD returns at -0.23 across 140 month-end observations since January 2015.

The page separates the numeraire effect from the demand effect, explains when gold and the dollar rise together during haven episodes, and publishes the aligned monthly series as a free CSV under an attribution licence.