The U.S. Dollar as a Dollar-Channel Proxy in Gold Return Dynamics: Evidence from 2000–2025

This study examines the determinants of gold returns over the period 2000–2025, a period marked by recurrent financial crises, geopolitical tensions, and major shifts in global monetary conditions. As gold represents both a strategic commodity and a key reserve asset, understanding the channels driving its price dynamics is central to debates in commodity finance and macro-finance. Using Lasso variable selection combined with post-Lasso estimation, block bootstrap inference, and rolling and subsample analyses, the paper investigates the role of major macro-financial factors in shaping gold returns. The results indicate that U.S. Dollar Index (DXY) movements have strong incremental explanatory power for gold returns, consistent with a reduced-form dollar-channel interpretation. At the same time, the marginal contribution of inflation, volatility, and the tariff episode becomes limited once the DXY is included. Overall, the findings contribute to the commodity-finance literature by offering a parsimonious reduced-form interpretation of gold return dynamics and by highlighting implications for commodity price risk, hedging strategies, portfolio allocation, and reserve management in an increasingly interconnected global economy.