Gold and Dow Jones price action

Unobtanium

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Been watching the Dow and gold prices.

From Feb 20-29, the Dow fell about 14%.
Gold also fell by about 6%, lagging by a couple days.

Then the Dow rebounded by only about 6% over 3 days while gold fully rebounded making up all losses over about 6 days.

Since then from Mar 4 to Mar 16, the Dow has lost about 25%, and gold has only lost about 10%.

See graph attached. (PMBug, BTW is there a way to put an image in with the body text by upload of file rather than only by weblink.)



The demand for PMs is very high. Nearly all major online dealers have increased premiums and are stating delays in filling orders. In addition central banks worldwide continue their buying sprees.

We all know about gold market rigging, but in a situation such as now with demand outstripping supply and a very unprecedented world condition, we would think that the gold price would be rising with very few serious dips.

I have heard that the dips are caused by the big traders liquidating their gold positions to cover margin calls in the stock market. But it also looks like people with dry powder are also buying strongly forcing the price to recover.

In the 2008 crash, we saw gold take a 7 month modest hit with the stock market crash, but recover in about 2-3 months, and then finally start to overtake its final position leading to all time highs.

My spidey senses tell me that we are likely to see more big drops in the Dow in the days and weeks to come.

Considering very strong gold demand, the million dollar question is whether we think gold will continue to fully quickly recover from the parallel drops with the Dow, or if it will succumb like in 2008 and take a fairly decent hit over the next several months?
 

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pmbug

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I mentioned it in another thread, but the first drop in the gold price circa Friday Feb 28 happened while the COMEX changed margin requirements: https://www.pmbug.com/forum/f13/days-price-movements-1221/index10.html#post34483

In effect, that hit to gold spot was engineered to a degree.

I agree that we will likely see more drops in the price of paper gold. The question is whether you will be able to find any physical gold or reasonable premiums in order to take advantage of it.

I went by my LCS this morning. There were almost wiped out of 1 toz gold. While I was in there, another customer came in looking for some silver. He told the salesman that silver spot hit $13 something and the salesman scoffed and said, "spot doesn't mean anything." The premiums on silver are nuts right now. He quoted him $17 something for ASEs (which the US Mint has sold out of). He (the salesman) told me that he is being quoted 3-6 week delays on getting new inventory in.

If we see deflationary forces taking effect in the credit markets, I would expect gold (and all commodities) will take a hit as folks liquidate assets to raise cash. I pray that if TSHTF, I'm able to ride it out without having to liquidate my stash.

I bought some gold today fully expecting the paper price to go down further in the weeks to come. I'm just not confident that the supply chains are going to hold up to where it will be easy to acquire later. If all goes to plan though, my kids will be very thankful for the gold years from now.

One last thought on Dow/gold correlation - there are different forces at work driving them. I wouldn't assume action in one market will be mirrored in the other. The Fed/PPT will be motivated to put a floor on the Dow best they can while saving dry powder for credit deflation without causing a currency crisis. Gold will be a bellweather for their efforts and they will try to "take the shine off" if it moves too high.

~~~

The only way to embed an image is to use the [img]webaddress[/img] BB Code. The image has to be publicly accessible on the web. If you don't have it stored on the net somewhere (image hosting site), you can attach it to the post like you did, then check the address for the attachment and add the embed code with an edit. I've added the code for your post above.
 

rblong2us

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Not sure I see much correlation .....

Its over a pretty small timeframe that covers a unique set of circumstances
 

Unobtanium

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Not sure I see much correlation .....

Its over a pretty small timeframe that covers a unique set of circumstances
The gold response is lagging the Dow. Shift the gold curve over to the left and you can see a correlation, except gold fully recovers on the second peak while the dow only partially recovers.

Was wondering if this latest gold dip will fully recover back up to $1700-ish. I now think it is going to zoom by 1700 in fairly short order (hint: not years).

The more I ponder, the more I think some sort of monetary reset is close at hand. The chickens should have roosted in 2008, and have been needing roost for 12 years as the bubble has massively inflated. Coronav might be the precipitator of and the scapegoat for the reset.

Here is a Bloomberg opinion piece:
A Shift in the Global Financial Order Is Upon Us
https://www.bloomberg.com/opinion/a...rices-bond-yields-marks-shift-in-global-order

It certainly looks as though the world has at last arrived at a point that it appeared to have reached a decade ago. Some new financial order, to replace Bretton Woods and the system that Volcker built to replace it, is now needed. A decade of monetary expansion has delayed the issue. It is hard to see how it can be delayed much further.
And a blog at Peak Prosperity:
https://www.peakprosperity.com/whats-causing-the-gold-silver-sell-off/

And an interview from Kitco:
A good listen in its entirety, but listen to 5:30 to 8:00 in a time crunch.

Peter Schiff:
https://schiffgold.com/peters-podcast/peter-schiff-weve-passed-the-point-of-no-return/
 
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