Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (53701)	7/22/2006 4:16:34 AM
From: YanivBA	Respond to of 116555

I agree that the correlation of gold to the carry trade and liquidity conditions could have been short term and is possibly behind us. The rational I stated as to why such a correlation has emerged is linked with the gains made by gold. The flip side of this logic is that losses for gold would serve to undo this correlation. The figures from Heinz about the speculator long positions sound very interesting, where are they coming from? The CoT? On the CoT charts I found I saw an unwinding of both sides but I am not familiar with the method of analysis. Mish, can you post a link to the source? I also need a reference to how gold is historically correlated with the yield curve, could anybody post one for me? Here's a chart we can try and make sense: stockcharts.com I take the EEM:$XJY as a proxy for the carry trade. We can see how the May 13 drop in gold was forced by the mini crash of the carry trade in the three preceding days. This can serve as evidence that the over-leveraged carry traders held gold side by side with their emerging market positions. However in the drop that followed gold actually kept out-performing EEM which can be seen by the GLD:EEM relation. If that is what is meant by " gold's REAL PRICE rises during periods of business and liquidity contractions" I understand but certainly prefer to be short. Another consideration is what happens if liquidity is to return to the markets. Starting from July we can see some decupling of gold from the carry trade. But since this is again by gold out-performing the carry trade (this time on the way up) what I deduct is that carry traders have spotted the out-performance of gold and are actually coming in, which should serve to increase the correlation of gold to liquidity conditions in Asia. YanivBA