Daily Speculations The Web Site of Victor Niederhoffer & Laurel Kenner Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

George Zachar

6/11/2005
Sherlock and Euro/Gold, by George Zachar

The classic gold/dollar teeter-totter broke down Friday, with the Euro down /Dollar up more than one "big figure" and gold up in dollar terms by more than $3.00.

If time and analytic firepower permitted, I'd look back to see what similar divergences might portend. I've struggled to find a way to communicate what the relationship is "saying", as neither unit is really within my expertise.

Then, it struck me.

This is the opposite of the iconic scene in Silver Blaze where the key clue was the dog's not barking.

Here, had both the Euro and Gold maintained their recent historic positive relationship (not barking) there'd be nothing out of the ordinary vis a vis Euro/Dollar retreating from a retrospectively frothy high.

But Gold is not quietly shadowing the single currency. It is "barking" at the Euro, and that "has information" for canny specs who understand those markets.

I don't have any specific meals here, but I am certain there are buffet tables down this road of inquiry.