Gold's relationship with the U.S. dollar is about to change
Myra P. Saefong

SAN FRANCISCO (MarketWatch) — The gold market's moving to Asia and the metal's relationship with the U.S. dollar will never be the same.

In a report released Thursday, the World Gold Council said gold's GCJ5, +0.63% relationship with the dollar DXY, +0.12% is "complex," as MarketWatch similarly observed in an article published Monday. It also said that relationship is set to "diminish" as the market shifts to Asia.

"While the fact that the gold price is quoted in U.S. dollars gets a lot of attention, its relevance is overstated," Juan Carlos Artigas, director of investment research at the World Gold Council, wrote in the report.

Gold's moves are sometimes linked to the dollar, with the metal often trading inversely to moves in the greenback.

But "changes in global markets and the structure of the gold market should soften the dollar's influence on gold in the long run," said Artigas.

Part of the changes he mentions is the rise of Asia as a trading hub for gold. "Traditionally, Western markets were at the center of trade," Artigas told MarketWatch.

But "in recent years, we have seen increased interest in trading hubs in the East," including the establishment of the Shanghai Gold Exchange, the Singapore Gold Exchange as well as Asian-tailored product launches by the CME CME, +1.04%  in Hong Kong, he said.

Gold demand outside of the U.S. has no clear-cut link to dollar movements, with Chinese demand having been as likely to rise when the dollar strengthens as it has been when it weakens, Artigas said in the report.

Gold is also likely to see more transactions being settled in nondollar currencies as the gold market "becomes less a spoke-and-wheel model ... and more a regional web-like exchange structure," he said.

Asian markets made up close to 80% of global physical gold demand in 2013, as the chart from the WGC below shows: