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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: ild who wrote (26122)2/9/2005 11:44:33 AM
From: ild  Read Replies (1) of 110194
 
Date: Wed Feb 09 2005 10:59
trotsky (morbius@gold timers) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
one of my points is actually that they ARE good. anyone who is still around and prospering in a sector that has produced large losses over 2 decades is bound

Date: Wed Feb 09 2005 10:58
trotsky (Hambone@gold stocks and the stock market) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
one needs to keep in mind that the correlation is a broad strokes one. obviously there are times when the gold sector decouples, e.g. 2001-2002 recently and last year, also '73-'75, and '78-'80.
i think the explanation has also to do with the yield curve. the gold stocks are reacting coincidentally to changes in the long/short yield spread, while the broader market reacts with a considerable lag ( which is to say, the gold stocks exhibit more sensitivity to changing monetary conditions ) .
in view of that, we should actually expect the recent decoupling to last a while longer. i.e., once the yield curve steepens again, gold stocks are likely to rise immediately, while the broader market will probably suffer through its lagged correction coincidentally with the recession the flattening curve is predicting.
note though that this will require that the SM doesn't decline too fast - if it hits too big a liquidity air pocket, the gold sector will be taken down as well imo.
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