Kitco Gold Index (KGX)
Shows how US dollar fluctuations impact the value of gold and other selected commodities
Commodities | Last (Bid) | Change due to performance of the USD We assume the closing times of the USD index to be the same as their respective metals. This is part of the reason you will see a variation of the change in the USD Index across different metals. Another reason is because the USD Index calculation happens only when the metal price is updated and only changes with each change in the metal price. That way the indicated strength or weakness in the USD is always correct for the time indicated of the last metal quote. | Change due to normal trading | Total change |
|---|---|---|---|---|
Gold Precious Metals | $2,292.60 (EST) | $0.00 0.00% | $-83.40 -3.51% | $-83.40 -3.51% |
Silver Precious Metals | $29.13 (EST) | $0.00 0.00% | $-2.14 -6.84% | $-2.14 -6.84% |
Platinum Precious Metals | $963.00 (EST) | $0.00 0.00% | $-41.00 -4.08% | $-41.00 -4.08% |
Palladium Precious Metals | $896.00 (EST) | $0.00 0.00% | $-20.00 -2.18% | $-20.00 -2.18% |
Oil Energy | $75.38 USD (EST) | $0.00 0.00% | $-0.17 -0.23% | $-0.17 -0.23% |
Copper Base Metals | $4.3821 (EST) | $0.0002 0.00% | $0.0134 0.31% | $0.0136 0.31% |
Nickel Base Metals | $8.0747 (EST) | $0.0004 0.00% | $-0.0004 0.00% | $0.0000 0.00% |
Aluminum Base Metals | $1.1509 (EST) | $0.0001 0.00% | $-0.0001 0.00% | $0.0000 0.00% |
Zinc Base Metals | $1.2499 (EST) | $0.0002 0.01% | $0.0208 1.70% | $0.0210 1.71% |
Lead Base Metals | $0.9767 (EST) | $0.0001 0.01% | $0.0026 0.27% | $0.0027 0.28% |
How US Dollar Strength and Weakness Affect Gold Prices
The strength of the US Dollar significantly influences the price of gold. When the US Dollar strengthens, buying commodities priced in USD, including gold, takes fewer dollars. Conversely, more dollars are needed to purchase these commodities when the US Dollar weakens. This inverse relationship accounts for a significant part of gold price fluctuations.
When the US Dollar strengthens, gold prices tend to decrease, and when the US Dollar weakens, gold prices tend to increase. A stronger dollar means each dollar can buy more, making gold less expensive in USD terms. On the other hand, a weaker dollar means each dollar buys less, making gold more expensive in USD terms.
Furthermore, the impact of US Dollar fluctuations on gold prices extends beyond the USD market. If gold prices rise in USD and other major currencies like Euros, Pounds Sterling, and Japanese Yen, it signals a genuine increase in gold demand and value on a global scale. Conversely, if gold prices rise in USD but fall in other currencies, it suggests the US Dollar has weakened. This can create a misleading perception of increased gold value when the devaluation of gold due to higher supply is masked by the weaker USD, highlighting the far-reaching effects of US Dollar strength or weakness on gold prices.
The actual supply and demand for gold also impact its price. Increased supply may lead to lower gold prices, but this can be masked by a weaker US Dollar, making it appear that gold prices are rising.
Our feature on Kitco.com breaks down the changes in gold prices into two components: the impact of US Dollar strength or weakness and the effect of regular trading activity. Interestingly, changes in gold prices due to US Dollar fluctuations similarly affect all USD-denominated commodities in the same proportion.
By understanding these factors, investors can better interpret gold price movements and make informed decisions.
Understanding the Kitco Gold Index: What It Is and Why It Matters
The Kitco Gold Index (KGX) is designed to determine whether the value of gold reflects actual changes in its value, shifts in the US Dollar, or a combination of both. This is particularly important for investors who want to understand the true drivers behind gold price movements.
The US Dollar Index® (USDX) represents the value of the US Dollar against a basket of six major foreign currencies: the Euro (57.6%), Japanese Yen (13.6%), British Pound (11.9%), Canadian Dollar (9.1%), Swedish Krona (4.2%), and Swiss Franc (3.6%).
The Kitco Gold Index, however, measures the price of gold not in terms of US Dollars but in terms of the same weighted basket of currencies that comprise the US Dollar Index®. This unique approach removes the US Dollar component, providing a clearer picture of gold's value independent of USD fluctuations.
To gain perspective, the KGX must be compared to the actual US Dollar price of gold. Our historical and live charts display both trend lines, allowing for direct comparison. Here’s what different scenarios might indicate:
Scenario 1: KGX is up, and the USD price of gold is up even more
This scenario indicates that gold has increased in value. Additionally, it means that the USD has weakened, exaggerating the increase in gold value when viewed in USD terms. This was a common occurrence in the early 21st century.
Scenario 2: KGX is down, and the USD price of gold is down even more
This scenario suggests that gold has decreased in value, though not as drastically as it might appear in USD terms.
Scenario 3: KGX is up, and the USD price of gold is down
In this case, the USD has strengthened relative to other major currencies, but gold has gained value overall.
Scenario 4: KGX is down, and the USD price of gold is up
This indicates that the USD has weakened relative to other major currencies, and the apparent rise in gold price reflects the weaker USD rather than an actual increase in gold value.
By understanding the Kitco Gold Index, investors can better interpret the underlying factors affecting gold prices, leading to more informed investment decisions.
