SPX (S & P 500) Is A Much Bigger Factor Than The US Dollar Is For Gold
Contrary to popular belief, SPX (S & P 500) is the primary gold/HUI/XAU driver/factor, not the US Dollar, check out the one year GLD (gold ETF) versus SPX (S & P 500) chart, see http://finance.yahoo.com/q/ta?t=1y&s=GLD&l=off&z=l&q=c&a=m26-12-9&a=p12&a=fs&a=w14&c=&c=%5EGSPC. "With all thy getting get understanding."
A few years ago the US Dollar and gold even had a positive correlation for most of a year's time, meaning obviously that the US Dollar and gold moved in the same direction, when they normally go in opposite directions. It's true that the US Dollar tends to be important to gold's price, but, SPX (S & P 500) is the primary gold/HUI/XAU driver/factor by a wide margin, if one's timeframe is days, weeks, and (many) months.
Adam Hamilton of Zeal fame has been saying in recent articles that he feels gold will go up when SPX (S & P 500) goes down/enters a Bear Market, and, I think he said that historically gold and SPX (S & P 500) go in opposite directions. Check out the one year (or any other timeframe) GLD (gold ETF) versus SPX (S & P 500) chart, see http://finance.yahoo.com/q/ta?t=1y&s=GLD&l=off&z=l&q=c&a=m26-12-9&a=p12&a=fs&a=w14&c=&c=%5EGSPC, and one can see that gold and SPX (S & P 500) have a surprisingly high positive correlation, especially on a short term basis.
It's only when one looks at multi years and decades that what Adam said is true. In other words, one needs to get the hell out of the way when SPX (S & P 500) enters a Bear Market (or even major multi month or multi week downcycles within Bull Markets), as it might have done yesterday, because, so much damage will be done to gold/gold stocks that it'll probably take many months if not years to simply get back to break even.
The longer the timeframe the less positive the correlation between gold and SPX (S & P 500), and, it isn't until one looks at multi year and Secular multi decade cycles that the correlation does indeed turn clearly negative. Looking at days, weeks, months, and even (to a clearly lesser extent) a few years SPX (S & P 500) is the primary gold/HUI/XAU driver/factor.
........ http://www.JoeFRocks.com/ .
HUI NEM XAU
A few years ago the US Dollar and gold even had a positive correlation for most of a year's time, meaning obviously that the US Dollar and gold moved in the same direction, when they normally go in opposite directions. It's true that the US Dollar tends to be important to gold's price, but, SPX (S & P 500) is the primary gold/HUI/XAU driver/factor by a wide margin, if one's timeframe is days, weeks, and (many) months.
Adam Hamilton of Zeal fame has been saying in recent articles that he feels gold will go up when SPX (S & P 500) goes down/enters a Bear Market, and, I think he said that historically gold and SPX (S & P 500) go in opposite directions. Check out the one year (or any other timeframe) GLD (gold ETF) versus SPX (S & P 500) chart, see http://finance.yahoo.com/q/ta?t=1y&s=GLD&l=off&z=l&q=c&a=m26-12-9&a=p12&a=fs&a=w14&c=&c=%5EGSPC, and one can see that gold and SPX (S & P 500) have a surprisingly high positive correlation, especially on a short term basis.
It's only when one looks at multi years and decades that what Adam said is true. In other words, one needs to get the hell out of the way when SPX (S & P 500) enters a Bear Market (or even major multi month or multi week downcycles within Bull Markets), as it might have done yesterday, because, so much damage will be done to gold/gold stocks that it'll probably take many months if not years to simply get back to break even.
The longer the timeframe the less positive the correlation between gold and SPX (S & P 500), and, it isn't until one looks at multi year and Secular multi decade cycles that the correlation does indeed turn clearly negative. Looking at days, weeks, months, and even (to a clearly lesser extent) a few years SPX (S & P 500) is the primary gold/HUI/XAU driver/factor.
........ http://www.JoeFRocks.com/ .
HUI NEM XAU
Labels: Gold, Gold Stocks, HUI, NEM, Silver, Silver Stocks, SPX, XAU
posted by Joe Ferrazzano at
3:18 PM
3 Comments:
I agree with the current amount of hedge fund activity in the PM sector the initial move for gold and gold miners will be down in a major market correction. This is easy to see by August. But the gold market is more of a global marketplace and it is possible for the Us to be in a deflationary cycle while the rest of the world is in an inflationary cycle and that coupled with the possibility of a change in the global reserve currency from the dollar to the Euro is why I think gold will go up. The central banks didn't defend the dollar at 80 and the last mini rally in it couldn't even get the dollar index over 79.
J-
By
Anonymous, at 6:36 AM
Hello and thanks for your thoughts. Assuming that HUI/XAU's Cyclical Bull Market since late 2000 has peaked in dramatic rollover mode with 5-11-06's cycle highs (at 401.69/171.71), since gold tends to lag gold stocks (didn't exhibit bull market behavior until April 2001 versus late 2000 for HUI/XAU), gold might not peak for a few months or more. So, gold might be surprisingly strong even if HUI/XAU have entered a Cyclical Bear Market. However, trading gold long will probably be risky.
I see the major factors for HUI/XAU/gold now being a huge deflationary real estate/mortgage/credit bust in the US and much of the rest of the world that'll last for years, and, China's stock market has had a huge spike move the past year plus, so, deflation should soon be a factor in China. Good luck.
By
Joe Ferrazzano, at 11:32 AM
To expand on the China comment. The huge spike move the past year+ is inflationary, but, once it breaks down that's obviously deflationary.
China is probably about to enter a Cyclical Bear Market along with the US and much of the rest of the world. Deflation is probably going to be the picture for most of the world for a few years or more.
By
Joe Ferrazzano, at 11:50 AM
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