Gold Correlations

[gpudi]

Hey guys this is my first thread. I just wanted to start this to discuss the correlations that have been associated with Gold in the past and their implications on the markets today. First in foremost the view that Gold is a risk off asset. This has been a very strong correlation in the past but in recent months the correlation is waning. My view is that people's portfolios ultimately link the whole market. If a trader gets hit on a position and gets a margin call he will not hesitate to sell gold to come up with the money. Another correlation is the negative correlation with the dollar. This probably one of the most popular market correlations of all. People traditionally buy gold in fear of further depreciation in the dollar. I feel as though this correlation still has a hold in the market. For this reason I am bearish on gold in the medium-long term. I think that QE is off the table for the time being, taking off pressure that was being put on the dollar. The other main driving factor of my view is that the Japanese are struggling with the strength of their currency as an export nation. Japanese businesses have said that the price is still to high even with the recent rally in in the doallr against the yen. As the dollar is the primary currency the yen trades against, an intervention by the Bank of Japan into the currency markets to weaken the yen could have very bearish implications in the GOld markt.

Please reply, argue, and provide charts to refute or support my claims.
thanks

 

[NVP]

hey mate

good thread....

Gold to me is an interesting market

1) its a currency...in fact the ultimate and original currency
2) its a Commodity as well

theres tons of articles written about gold so just google the web and sit back and read them

My main usage of it is to establish how the market is viewing the G8 family of Forex Currencies....(and thats gold valued in relative Basket terms - not just the Gold/$USD price)

if Gold is generally higher and rising in relative terms than the whole G8 family i know the world is not loving the paper folding (Fiat) stuff and I will trade accordingly....even buying gold if it suits me as an easy profit

If gold falls into the G8 pack I know its neutral and nothing really is signalling

and if gold falls below the G8 I know for some strange reason people want the Paper folding stuff back in the game and not gold

and guess what the main scenario has been in recent months...people do no rate holding devaluing paper FIAT currencies so been a boom time for Gold in whatever you currency you buy it in...

regarding Gold/$USD which is the most generally portrayed chart....January was nice - see below - see how not only were the G8 currencies mainly falling and Gold rising....but the Green USD was REALLY falling !

This is a FXcorrelator adapted for Gold (in Violet) and on a 500 setting.i'll drop it on my thread here in fact....no worries

http://www.trade2win.com/boards/for...-basic-ideas-strategies-1069.html#post1807718

Gold Rules currently thats for sure

N:smart:

 

[gpudi]

thanks

Yeah Gold is certainly not just a normal commodity. I think that it can also be a very good hedge to have in a long term portfolio. Do you agree that in the medium term the Bank of Japan potential pressure on the USD/JPY could produce significat downward pressure on gold.

 

[YouAreNotFree]

thanks

Yeah Gold is certainly not just a normal commodity. I think that it can also be a very good hedge to have in a long term portfolio. Do you agree that in the medium term the Bank of Japan potential pressure on the USD/JPY could produce significat downward pressure on gold.

Why would that be the case?

The main drivers for Gold are negative real interest rates and currency debasement.

The devaluation of the Yen is therefore positive for Gold. It also means there is one less safe haven available. We are fast descending (maybe already there) into a currency war.

 

[Atilla]

Why would that be the case?

The main drivers for Gold are negative real interest rates and currency debasement.

The devaluation of the Yen is therefore positive for Gold. It also means there is one less safe haven available. We are fast descending (maybe already there) into a currency war.

I think he means BoJ sell YEN and buys USD and the the inverse relation re:USD/GOLD makes it go down.

However, I don't believe this is likely to be a major factor. Not sure how much of a move in JPY/USD is required to shift gold.

I would say increasing economic US activity will raise demand for USD as well as USD to buy more oil and thus impacting gold.

As economies stabilise gold will come off the highs as we have been seeing. Asian consumers have been cooling off the jewelry as it is too high a price. Expectations are it's likely to fall.


I see only one bull for gold. It is the sabre rattling between Israel and Iran. Iran is no threat to Israel and neither is Israel to Iran. Just in the political interest of both countries to mouth off a lot of tripe and each time gold goes up.

This is because in the event of war there is expectation US will defend Israel. If that's the case then it can kiss it's dollar good bye as the US can not afford and sustain another war with the current level of their twin deficits.

Iran will not be alone this time either unlike Iraq - as Russia and China will supply Iran as they do Syria. Also Iranian generals will not tell their men to stand down as Iraqis did. It will be a long drawn out war.

The straights of Hormuz will be closed and oil will go through the roof. This is the worst geopolitical uncertainty that keeps gold where it is.

Gold is set to fall as economic recovery blooms and the long L shaped curve and becomes well established imho.

 

[Pnty]

Why would that be the case?

The main drivers for Gold are negative real interest rates and currency debasement.

The devaluation of the Yen is therefore positive for Gold. It also means there is one less safe haven available. We are fast descending (maybe already there) into a currency war.

Not only that. Gold is also driven higher by political and financial uncertainty present in all developed countries. Also keep in mind the problems in Middle-East and the eagerness of US politicians to solve everything through killing.

 

[CharlesBakerfx]

Until few months ago the gold was rising no matter if the stock rose or fell. Before that, when the big crisis explode, investors found the gold as a safe bet and its price jumped each day the stocks fell. However, in the recent six month it seems that air started to came out from the babble and the gold lost 30%. Currently, I don't see any strong correlation between the gold and any kind of instrument. What I see is that the gold drops when the stock fall, but don't see it rise when the stocks correct up.