The Global-View.com D.O.G. (Dollar, Oil and Gold) Index
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Most successful forex traders keep track of more than one market at a time when trading. They keep an eye on a number of key forex relationships, and also watch the price of benchmark instruments such as gold and oil. In an effort to summarize the movement of all these items, Global-view.com has developed the "D.O.G." (Dollar, Gold and Oil) index. The "D.O.G." index reduces to a single number the daily value of the dollar for top forex trading currencies, gold and oil. The index falls as the purchasing power of USD weakens and rises as it gains.
The forex value of the dollar is based on the USD change against the top six trading currencies (Eurozone euro, British pound, Japanese yen, Swiss franc, Canadian dollar and Australian dollar) weighted by trading volumes based on data reported in the
BIS Triennial Forex Survey.
The weighted USD value is then mixed with the change in the price of gold and oil to produce an index much like that published for stock prices (January 2, 1999=1.00). So that the volatile price of gold does not completely dominate the calculation, the index is adjusted by the historical price volatility of each of the three major components. The goal is to arrive at a subjective measure of the purchasing power of the U.S. currency relative to these three key items.
As indicated, the base date for the index (index=1.00) is January 2, 1999. That was the first official trading date of the euro, and close to the start of the millennium. As of the April 15, 2011 close, the composite index
had fallen from its 1.00 base in 1999 to 0.506. The USD sub-component was 0.75, oil was 0.41 and gold 0.19.