Written by Goldfinger
In my last article "Has Gold Lost Its Way?", I wrote about the correlation between stimulus, non stimulus, metals and the stock market. I think the market showed us yesterday the correlation is alive and well. The Fed published the minutes from their last meeting on Tuesday. Their opinion was that inflation is under control, and the economy was growing moderately without further monetary accomodation. This seems to go against what Bernanke said last week. He was very cautious about the jobs and seemed open to QE3. The result today was a fair drop in the market, (Dow down 124) which coincided with a drop in gold equities and gold (around $28) seen in the chart below on the red line.
Gold and gold stocks compared to the market today. You can see the gold stock leverage with GDX being down twice as much.
hat tip BigCharts.com
I believe the precious metals markets will go higher, partly as there are no good options to store your money, and two because sooner or later the Fed will become worried about a stagnant economy. When Mr. Market sees more stimulus, it will reach for the stars.
I see the gold related market at an equalibrium point. It could go either way, depending on events. We have not heard from the EU lately, but it is still lurking. The Fed could move the decimal point. This is like going to Vegas, and if I go there I like to be the house with the advantage - not the guy pulling the slot handle. I am on the sidelines watching. I pulled up the charts for metals stocks for the last few months to see if there was a big rebound the next day after a good sized drop. I did not see anything that would indicate today was a good day to get back in. I am still waiting for my signal to jump back in.