As mentioned in the previous idea, for Gold to go up we need 2 factors:
1 - market crash from hyperinflated values
2 - fed intervention in the form of rates cut / quantitative easing to make it attractive
I would not consider what happened to gold before 2006, when it seems that it is perfectly correlated with spx, simply because in 2000 an ETF on gold was introduced, bringing in a lot of liquidity to the underlying. Before it was difficult to buy gold if not with futures. It became mainstream.
Let's concentrate on what happened from 2007 onwards, without concentrating too much on levels, but more on timings in a cause-effect analysis.
Spx was coming from a 4-year bull run after the .com bubble, prices were going beyond any common sense, bubble fears were increasing, interest rates were high at 5.25%: all the ingredients for a recession were there.
After freddy mac and fanny mae defaults, FED started to cut rates until the abrupt cut from 4 to almost 0 in Nov 08, which was "incidentatally" the point in which gold reached its local mininum and experienced its bigger loss in years. Until rates are not cut indeed, a financial crisis itself does not make gold attractive to investors, as their liquidity can be used with bigger returns elsewhere (also it is needed to keep the business open in the intitial phase of the downturn). The market continued to fall until march 09, while gold started its incredible run to 1900usd.
In 2012, when the FED announced a progressive return to "normal" rates situation, gold started to decline and fell asleep for many years as no more attractive to investors during the EVERYTHING BUBBLE. Until 2019, when, amid bullish markets, fears of another recession started to mount again. Everytime gold, even if sleeping, sets to a higher level: 600 in 2008, 1000 in 2015, 1400 could be the one at the present time.
Now, markets are crashing and FED just announced a rate cut to 0. Can you see the dejavu?
1 - market crash from hyperinflated values
2 - fed intervention in the form of rates cut / quantitative easing to make it attractive
I would not consider what happened to gold before 2006, when it seems that it is perfectly correlated with spx, simply because in 2000 an ETF on gold was introduced, bringing in a lot of liquidity to the underlying. Before it was difficult to buy gold if not with futures. It became mainstream.
Let's concentrate on what happened from 2007 onwards, without concentrating too much on levels, but more on timings in a cause-effect analysis.
Spx was coming from a 4-year bull run after the .com bubble, prices were going beyond any common sense, bubble fears were increasing, interest rates were high at 5.25%: all the ingredients for a recession were there.
After freddy mac and fanny mae defaults, FED started to cut rates until the abrupt cut from 4 to almost 0 in Nov 08, which was "incidentatally" the point in which gold reached its local mininum and experienced its bigger loss in years. Until rates are not cut indeed, a financial crisis itself does not make gold attractive to investors, as their liquidity can be used with bigger returns elsewhere (also it is needed to keep the business open in the intitial phase of the downturn). The market continued to fall until march 09, while gold started its incredible run to 1900usd.
In 2012, when the FED announced a progressive return to "normal" rates situation, gold started to decline and fell asleep for many years as no more attractive to investors during the EVERYTHING BUBBLE. Until 2019, when, amid bullish markets, fears of another recession started to mount again. Everytime gold, even if sleeping, sets to a higher level: 600 in 2008, 1000 in 2015, 1400 could be the one at the present time.
Now, markets are crashing and FED just announced a rate cut to 0. Can you see the dejavu?
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