Intermarket relationships provide traders and investors with vital clues about likely future price action in the financial markets. Tyler Durden of Zero hedge discusses the recent breakdown in the gold to stocks ratio and what this means for investors in the months ahead…
The structural collapse in paper gold prices has been met a seeming ‘money-on-the-sidelines’ flourish of investors looking to buy the physical asset. However, when asset relationships break-down so significantly, as gold and stocks have in the past 90 days, one has to take a step back and think “what changed?” As the chart below shows, the last time the correlation between stocks and gold was this negative, things did not end so well for the high-valuation equity momentum chasers…
And just for fun, from Barclays’ Jordan Kotick, the last time the commodity/USD relationship broke down to such an extent was just ahead of the 2008 equity market decline.
….More at When Gold and Stocks De-Correlate
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