We revisited our Safehaven correlation analysis where we compare GOLD with 10yr Treasury (this time we took the yield for techn. reasons). Last time we observed the peak and expected some correction which occurred in Gold.
We see that once a correlation extreme has been reached that the extreme tend to correct for a couple of months as marked in the 2nd graph.
raw chart
What does it mean ?
- We will see some phase of positive correlation where Gold moves with the 10yr Interest Rates.
- Rates go further down and Gold will follow down as well: LIQUIDATION of the RISK TRADE
- Gold explodes upwards in a rising rates environment: INFLATION expectations go up
Which case materializes is uncertain, but we do know that rates and gold will go hand in hand :)
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