If you’re buying gold, you’re actually just selling dollars

So far this year, being long gold and being short the dollar have been two sides of the same trade.

This week, gold and the dollar index hit the highest and lowest levels in 15 months, respectively. And over the past 40 sessions, the daily moves of the yellow metal and the dollar index have seen an inverse correlation of -0.71, implying an almost perfect opposing relationship.

Actually, the correlation between gold and the greenback has been falling all year, and the current level is the lowest this measure has been since 2012.

Gold and the dollar do tend to enjoy an opposing relationship. Over the past 20 years, the daily moves of gold and the dollar index have had a correlation of -0.37. This makes sense, since as each dollar loses value, it should take more of those dollars to buy the same amount of gold.

Yet the poignancy of the relationship has become much more striking lately. And that means for those who believe the dollar is set to fall further against a basket of major foreign currencies (which is what the dollar index tracks), buying gold could be an attractive option.

"Gold has so much going for it," Evercore ISI technical analyst Rich Ross said Monday on CNBC's "Power Lunch." "The ongoing collapse of the dollar, the ultra-dovish Fed and the erosion of confidence in central banks more broadly, it all favors gold."

But Stifel Nicolaus portfolio manager Chad Morganlander also cautions that the trend could reverse if the Federal Reserve decides to go ahead and raise rates.

"Once the Federal Reserve starts to signal that they're going to be tightening, that's going to reverse [gold's] trend and [cause] quite a quick jolt to the market," he said Monday on CNBC's "Power Lunch." "So investors should be somewhat more circumspect about that issue."

Read MoreGold eyes $1,300 again as weaker dollar, fund inflows support


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Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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