TradFi Weekly Review: Why Has the Correlation Between the US Dollar Index, US Stocks, and Gold Failed?

In traditional macro analysis frameworks, the U.S. Dollar Index, U.S. stocks, and gold have an established “dance rhythm”: a strong dollar usually indicates a relatively robust U.S. economy, attracting capital inflows and benefiting U.S. equities; however, a strong dollar also puts downward pressure on dollar-denominated commodities like gold. Conversely, a weak dollar often supports gold prices and exerts exchange rate pressure on multinational companies’ overseas profits.

However, by 2026, this classic script is being completely rewritten. The market performance over the past week provides an excellent snapshot of this subtle and profound divergence in relationships.

Anomalies in the Data: Simultaneous Rise and Fall vs. Extreme Divergence

The core drivers of global markets this week are undoubtedly the escalation of geopolitical conflicts and the repricing of inflation expectations. Reviewing weekly data reveals several phenomena that defy traditional intuition:

The “Negative Correlation” Between the Dollar and Gold Temporarily Fails

On March 6 Beijing time, the U.S. released unexpectedly weak February non-farm payroll data, showing a decrease of 92,000 jobs. After the data was announced, the dollar index rose 0.3% to 99.33 instead of falling. Normally, weak employment data should weaken the dollar, but geopolitical tensions increased safe-haven demand supporting the dollar. Meanwhile, spot gold surged over $40, briefly breaking through $5,125 per ounce. This created a rare scene of “both rising together”—risk aversion sentiment simultaneously boosting the dollar as an international reserve currency and gold as the ultimate safe haven asset.

The “Positive Correlation” Between the Dollar and U.S. Stocks Disappears

Traditionally, if the dollar rises due to a strong economy, U.S. stocks should also strengthen. But on March 3, the dollar index hit a three-month high driven by safe-haven demand, while the three major U.S. stock indices all opened lower, with Dow futures dropping as much as 2.13%. The market logic was: Middle East tensions pushed oil prices (Brent crude briefly up over 9%, surpassing $90), intensifying inflation pressures, leading traders to expect the Federal Reserve to maintain high interest rates longer, even delaying the second rate cut until September. The suppressive effect of high rates on risk assets outweighed the so-called “confidence premium” from a strong dollar.

Gold and U.S. Treasury Yields “Decouple”

J.P. Morgan pointed out that since 2022, gold and U.S. stocks have risen together, diverging from real interest rates, and cannot be simply explained by geopolitical risk. The sharp fluctuations in gold this week (initially dropping over 4% intraday before quickly rebounding) further confirm this. Markets are no longer solely pricing gold based on U.S. real interest rates but are paying more attention to central bank gold purchases, the dollar credit system, and tail risks from extreme geopolitical events.

In-Depth Analysis: Why Is the Traditional Framework Failing?

These anomalies are not random disturbances but signals that the “reconstruction of the international monetary order” has moved from behind the scenes to the forefront. Miao Yanliang, Chief Strategist at China International Capital Corporation, pointed out that the current asset shifts reflect a declining safety of dollar assets.

The Diminishing “Safe-Haven” Attribute of Dollar Assets

In the past, during global risks, capital would flow into U.S. Treasuries and dollars, forming a “safe-haven flow.” But now, issues like U.S. debt (debt-to-GDP ratio at 120%) and policy uncertainties (such as Trump policy shocks) have eroded the “safety premium” of Treasuries. Sovereign funds (e.g., Nordic countries) are even beginning to sell U.S. debt due to political risks. When safe assets are no longer perceived as absolutely safe, capital flows become more complex—some into gold, some back home—making simultaneous rises and falls of the dollar and gold the norm.

The “Sovereignization” of Inflation Logic

Historically, inflation was mainly driven by overheating economies. Today’s inflation is compounded by “geopolitical supply shocks” (e.g., the Strait of Hormuz disruptions causing oil prices to soar). This supply-side inflation is deadly for U.S. stocks because it directly erodes corporate profits and prompts hawkish central bank policies, yet it provides strong support for gold. Goldman Sachs warns that markets are caught in a painful “oscillate and attempt to break through” cycle.

AI Narratives and Currency Cycles as Hedging

Another major theme in global assets in 2025 is the AI technological revolution. Although macro factors like the dollar and interest rates suppress overall equity valuations, AI-driven tech stocks (like Nvidia) attempt to counter macro pressures with industry trends. However, this week’s market shows that when macro risks (inflation/war) are large enough, even AI giants are not immune (e.g., Nasdaq futures often fall more than Dow futures).

Investment Insights: How to Find Certainty in the “New Order”

For Gate readers, understanding this macro relationship shift is directly related to predicting the linkage between crypto markets and traditional finance (TradFi).

• The “New Role” of Gold: Gold is no longer just an inflation hedge but a core tool against “dollar credit decay” and “global fragmentation.” JPMorgan has raised its long-term gold price forecast to $4,500 per ounce. For crypto users, this offers an important reference: as institutions treat gold as a “digital gold” beta anchor, the long-term price center shifts upward, providing macro backing for the long-term value of limited-supply assets like Bitcoin.

• U.S. Stock Market Divergence: Against the backdrop of a high or even weakening dollar (as predicted by Chief Industry Researcher Lian Ping), U.S. earnings growth will rely more on domestic revenue and demand. Investors should be cautious of multinationals heavily dependent on overseas income and insufficient hedging.

• Crypto Assets’ Macro Attributes: Currently, markets view Bitcoin as a “macro asset,” with a relatively high correlation to the Nasdaq 100. But under extreme geopolitical risks, whether its “digital gold” narrative can withstand liquidity shocks remains to be seen. The sharp swings in gold and silver (silver once down over 12%) remind us that no asset is entirely safe during liquidity crunches and panic.

Conclusion

This week’s TradFi markets clearly show that the triad of the dollar index, U.S. stocks, and gold is undergoing a restructuring. Weakening of the dollar is a result, not a cause; asset revaluation is a process, not an endpoint. In an environment where monetary order is being reconstructed and geopolitical factors are becoming routine variables, investors must abandon simple linear extrapolation and develop a more multi-dimensional macro perspective.

At Gate, we continue to monitor global macro shifts and traditional asset rotations, helping you cut through the fog to discover opportunities from TradFi to crypto. Whether risk sentiment heats up or liquidity expectations shift, Gate aims to be your bridge connecting these two worlds.