We looked at the Dollar-Gold 1yr Correlation since the 70ties and found that with one exception a rising Dollar and a rising Correlation coming from negative correlation levels of below -80% usually seem to act as jetfuel for gold.
To better understand the pattern imagine the following sequence of events...
- Gold rises ,
- Dollar tumbles ,
- "end of the Dollar" seems approaching
- inflation expectations rise
- asset prices begin to fall
- dollar rises from deleveraging and reserve currency status and certainly from EURO weakness ( <=> ".....dollar is the least bad currency out of a basket of bad choices")
- Safehaven SWISSFRANC disappears
- QE3, QE4 ... and European equivalents and all sorts of "fiscal and monetary fixes and programs" are expected
- inflation expectations rise again (in an actually deflationary environment)
- Gold is extremely overbought but doesn't really put in a deeper correction and simply corrects sideways (over time)
- BUYING PANIC in GOLD arrives !!
There is a chance that we are in stage 9 and/or 10. If Gold just buys time over the next weeks and the stock market falls another x% and the political class opts for "fixes" then better start moving into Gold, Cash or the Dollar (or all of them).
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