Sunday, December 8, 2013

Correlation of gold stocks and gold bullion price movements


gold mining stocks and gold itself tend to rise and fall together. everyone knows this. in fact there have only been two periods in the last 20 years when the 21-week correlation coefficient of gold stocks and gold went negative.

but my how important did these periods prove to be! the early-2001 drop signaled the massive bull market in precious metals, while the negative correlation in mid-2011 coincided with the great reversal we continue to endure.

even though I anticipate a very tradeable rally in metals any time, the complete lack of a waning (let alone negative) correlation right now gives me another reason to remain skeptical that we are on the verge of a primary turn of trend in the precious metals complex.