Feb

18

Call it a cascade or call it the conservation of energy, or call it signaling or money outflows—- But the decline of 60 bucks of gold in a week to below 1600 intra day sends the storm signals up. It could happen while one was long. I looked at the effect of gold down 60 bucks in a week as of a Friday. And it's happened 18 times in last 13 years. It seems to have no inordinate effects statisticlly– being bearish for the stocks and oil and bullish for the dollar and bonds and gold in the next few days and someewhat bullish for the stocks on a 2 week basis.

Anatoly Veltman writes: 

Ok, so you did derive those slight biases you mention. But how is "60 bucks", and exactly Fri-to-Fri supposed to be a determinant? 60 bucks 13 years ago would be 20% depreciation; while today it's less than 4%. A few mega-funds like Pimco, Bridgewater, Paulson were not in gold until a few years ago. China, Russia were not significant players until a few years ago. EU was not in liquidity crisis until a few years ago. Cash gold was not above Comex gold. The dollar/gold relationship has waffled between negative and positive corellation last few years. There were no QE-infinity until a few years ago, no ZIRP. What if the entire this week's slide was due to China market holiday? There are just too many cross-currents for this kind of 13-year statistical sampling. Unless significantly fine-tuned, the conclusions will inevitably be of little use.


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