Nonlinear dynamics of gold and the dollar

Notwithstanding the widely held view that gold and the dollar are negatively correlated, we ask when and why gold and the dollar sometimes depart from their typical inverse relationship and go so far as to move in parallel. Using a threshold vector error correction model (VECM), we investigate the nonlinear relationship between gold and the dollar. We find evidence of short run positive correlation between gold and the dollar under extreme...