myth or fact gold moves opposite to the stock market?

[HawkHybrid]

we've all heard it, but does gold move up when the stock

market declines?

since the beginning of the year gold is up, stock market is

also up.

since 1971 gold is up, stock market is also up.

there are times that gold moves in opposite direction to

the stock market but how long does it last for?

by volume trade over longer time frames, has gold moved

in the same direction as the stock market?

 

HH

[KDave]

May I respectfully point out that everything has moved up measured in dollars since 1971.

Can the gold to stock ratio help answer this? (Dow to gold?). 

[sixgun]

11 minutes ago, KDave said:

May I respectfully point out that everything has moved up measured in dollars since 1971.

Can the gold to stock ratio help answer this? (Dow to gold?). 

Everything but the purchasing power of fiat currencies. If anything has not gone up in price it has in reality gone done.

[HawkHybrid]

37 minutes ago, HawkHybrid said:

since the beginning of the year gold is up, stock market is

also up.

 

how does a falling dollar explain this?

 

what would the gold to stock ratio tell us about when gold

moves in the same direction or in opposite directions?

(the ratio changes if gold moving in the same direction at

a slower or faster pace)

 

HH

[KDave]

Falling dollar means more dollars to buy both gold and stocks? Both move 'up', so both are negatively correlated to the dollar 

Are they negatively correlated to each other, you are right the ratio tells us nothing only how cheap or expensive one is relative to the other, not if they are correlated.

Are you testing us HH? Do you know the answer because I don't  

 

[HawkHybrid]

I don't know the answer. 

 

I'm just not sure why both the stock market and gold has gone

up since the beginning year. it seems too short a time frame

for it to be just inflation. also the move in gold is less in % but

still a sizeable move at ~4% since last xmas.

I'm thinking that gold might be less negatively correlated to

the stock market(by volume) than people expect.

 

HH

[sixgun]

Trump is claiming credit for the stock market - Munchkin rang round the banks asking about liquidity (code for don't worry about liquidity) - the Plunge Protection Team, the central banks and the Exchange Stabilisation Fund all locked and loaded. The US economy is Wall Street.

There is reason to believe the US markets will keep buoyant until at least 2020 pumped up with funny money. A stock market collapse would be a potential kill shot for a second term.

Then we have gold - the central banks are stepping up through the gears on the buy. Repatriations have to be found, for the original gold is long gone - as we saw with what German treasure was returned - all new bars.

The forces driving the two are not tightly connected. So gold and paper run up for different reasons and so can both run up together.

[HawkHybrid]

7 minutes ago, Bdean316 said:

What stock market are you comparing against as it cannot be the Chinese market?

And doesn't the whole world have access to the gold market?

Gold's gone up recently due to the dollar weakening....

 

s&p 500.

the dollar has not gone down 4% since xmas(it's mostly flat)

people say gold is negatively correlated with the us stock

market.

 

HH

[HawkHybrid]

5 minutes ago, Bdean316 said:

02/02/19 GBP to USD = 1.261

today GBP to USD = 1.305

I'd say that's a weakening of 3.4% and that's against sterling who no one wants to hold at the moment

 

the dollar index is sitting around 96-97 since xmas

 

HH

[KDave]

Is it as sixgun says? Central bank gold buying is very high at the moment, I dare say record high (but not sure), also is there not Chinese demand for new year; this time of the year it is all conspiring to push up gold. Separate reasons fundamentally as to the stock market rising. If it is not the dollar there must be an explanation in each market, perhaps the correlation is only coincidental and unusual.

The negative correlation is probably there, it is just over longer time frames than since christmas perhaps? There will be times when gold moves up with stocks as now (for whatever fundamental reason) but perhaps it is rare. Comparing the two on a chart over time perhaps since 1971, see how they look against other assets as well, to determine how to find out how common this is. 

Having just watched the Belangp video gold and stocks together are less volatile than stocks with bonds, that suggests there is indeed mathematical negative correlation for gold and stocks. When one goes up, one goes down, meaning overall the volatility of the portfoilio (40% gold to 60% stocks in the example) is low. The fact bonds are positively correlated to stocks 50% of the time (up and down) explains why bonds and stocks together are more volatile in the whole, as 50% of the time they both rise together and fall together. The correlations over time are demonstrated by the relative volatility of the two portfolios. Gold must be negatively correlated to stocks then to have low volatility in the portfolio, logically speaking. 

Why do they behave this way? I will think on it, it will be something to do with human perception of the assets and behaviour in the market, or it could be fundamental nature of each asset I don't know. 

[sixgun]

Gold is money. Everything else is credit (aka debt).

Gold is priced off the bond market which is fake money with a yield.

Bonds are priced off risk and inflation. Inflation is the measure of the depreciation of fake money. Bonds must at least yield the inflation rate or there is capital depreciation.

Bond prices vary inversely with yields.

Take £100 of Gilts yielding 4% - if the yield moves to 8% the price of those Gilts goes to £50 to achieve this.

So if inflation is taking off, bond rates will climb and bond prices will fall. If inflation is rising, the fake money is depreciating and will buy less real money (gold), so gold priced in fiat appears to go up in value when in reality it is fiat that is depreciating.

Stocks should reflect the growth and economic outlook for the underlying companies. Gold is real money and its price in fiat reflects inflation and the health of fake money.

 

[KDave]

The driver of both is the expectation/actual rise of inflation alongside economic growth or positive economic outlook. The rise of both is dollar related then, it is just not obvious from the lack of movement in the dollar index. The market is changing position based on expectation. 

Is it linked to the interest rate policy perhaps. I have not been paying attention but I assume the market anticipates a slowing of interest rate rises and either a slow down or end of tightening, the FED must have changed tune? 

[Tape]

Gold prices rise when gas prices rise, you UK people already have high gas prices so I guess it don't make a difference for you.

[KDave]

Peter schiff podcast;

https://www.youtube.com/watch?v=-JHNWAx4cnQ

His theory - inflation is coming. Stocks market is pricing in china trade deal (hence the rise). Stocks will resume bear market soon.

He doesn't say it but inflation will drive gold higher.  

Longer term then gold is moving up in line with the trend (bull market), this leg driven by anticipation of inflation (fed policy). Stocks are moving up now as a counter trend rally (bear started early last year), based on buy the news (china trade deal). Negative correlation will shortly resume, gold will continue to rise, stocks will fall.

[HawkHybrid]

 

HH