AndyM
Short

Gold to decline massively with SPX sell-off. Same as 2008.

FX:EURUSD   Euro Fx/U.S. Dollar
154 7 8
Good morning all.
I was playing with the correlation of SPX             vs EUR vs XAU , specifically I was interested in the reaction of the market to the dollar and Gold             in the times of the crisis.
What I discovered was that in 2008 both EUR and Gold             declined till the very end of wave 3 of the sell-off in SPX             .
That means that till almost the very end of the panic Gold             was not viewed as a protective asset, but the Dollar was.
In the light of the forthcoming SPX             sell-off I think the scenario will repeat itself, as nothing really changed in the relative perception of those two assets (It's actually worse for Gold             these days: speculators hate it).

What this will mean for us is that when SPX             starts declining (it will!) a massive decline in Gold             will happen during the first part of the crisis, combined with the strengthening of the dollar. Then both may reverse.

In that light I am updating the wave count for Gold             , which I will publish shortly.
LastBattle
a year ago
Dollar is a pretty liquid asset, you can easily obtain it after dumping your shares but not gold (especially physical bullion)
In times of a larger economical uncertainly, gold will be a better protective asset than Dollar. 2008 collapse largely solved by swift action by US government to bailout...

In my opinion even if SPX does start dumping now, it'll only affect gold in the short term but not the larger trend which is a secular bull market right now.
+1 Reply
IvanLabrie PRO LastBattle
a year ago
Gold still looks bearish in all timeframes though.
Heavy sell pressure on it, keeping it from rising.
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AndyM PRO IvanLabrie
a year ago
Gold is in sync with EUR so both will move together. I had a thought today: because of carry-trade on EUR (not just JPY) we may see the following reversal: S&P down, EUR up, gold up, Crude up, USDCAD down. Somehow I had thought that the EUR rally will be accompanied by S&P rally, but we are likely to see the opposite within a week or so.
I expect another leg of a zigzag to be completed in SPX next week, reaching 2150 and then the show is off. Same timing for other instruments. I may be insane to expect a Crude rally with SPX sell-off, but it has more correlation with the dollar than with SPX.
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IvanLabrie PRO AndyM
a year ago
I agree, it makes sense to me.
I'm short audusd and nzdjpy, while long gbpusd and usdjpy for now.
I think we have some more days of risk on rally, but ultimately that gbpusd long will really pay off (I'll close the second pair of each spread trade once I think SPX/Gold had enough)
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AndyM PRO IvanLabrie
a year ago
yep, long gbpusd too.
+1 Reply
AndyM PRO IvanLabrie
a year ago
I'm a little worried about that one. EURGBP is completing an ending wedge, so an upsurge in EUR will be also due to its strengthening vs GBP. Which means that GBP rise will be slower than EUR. I might bet on EUR a bit more than on GBP in the next few days.
snapshot
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IvanLabrie PRO AndyM
a year ago
I closed 75% of my gbp long.
Left 25% running with a stop under wave 1 of 3 if that's a 3.
(see 4h chart)
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