The fact that U.S. rates are rising faster than elsewhere on the globe is boosting the dollar. A rising dollar usually hurts the price of gold. And it is. Chart 1 shows the upturn in the Dollar Index (UUP) near the start of September (when Treasury yields turned up) coinciding with a decline in gold (GLD). It also makes economic sense that a stronger global economy would favor stocks tied to industrial metals (like aluminum, copper, and steel) over gold. And that is certainly the case. The rising brown line in Chart 2 is a ratio of the copper miners ETF (COPX) divided by gold miners (GDX). The ratio recently hit a new high for the year (thanks to a three-year high in the price of copper). Notice how closely the copper/gold mining ratio has tracked the 10-Year Treasury yield (green line). The fact that both lines are rising together is a vote of confidence in the global economy.
