GOLD and equities rose together for quite some time already, not showing particular divergence. What one would expect in such turbulent times is that GOLD outperforms equties more since money flow goes to safe havens instead into riskier assets like stocks. But at this moment such divergence is not as clear and doesn't indicate such thing. Now we have huge instability in economies/markets worldwide and investors are very cautius with their portfolio structuring.
Last equity fall got many investors selling gold at the same time to cash out to meet margin calls for their equities instead of just selling them. Usually what happens is that GOLD sharply rises back and equities barely.
Another thing is GOLD is the original and probably the best liquid alternative, and seems investory rely much more on GOLD than on bonds for example, and that points out how much this crisis and situation is uncertain. That has been going on for a while, because wherever you look you see negative yields or small yields, but not on GOLD.
The real question here is what could go down first, equities or GOLD? It doesn't take some wisdom to conclude that this money printing and expansionary monetary policy is not something to be taken for granted. It never was! Equity rally driven by low rates and bond buying programs seems to have got us to the point where we should re-consider valuations and try to figure what the next move will look like.
The SPX/GOLD ratio fell underwater since consistent wave of appreciating since 2012 and now currently sits at 1.7 below 1.8 support confluence level. If stock market goes down another time, we probably could see same scenario happen once again, but this time with much smaller correlation since I beleive most of investors already took their losses into the account and cashed back into the gold and other safe havens waiting for such scenario to happen. But this is also ''a sword with two ends' since it's yet unclear which side will prevail.
TECHNICALS:
GOLD is slowly going into 1800 confluence, while S&P is near 3k which is also huge confluence level. 20/100 ema's are well supporting GOLD for quite some time, while S&P is being held by 100ema on daily and 20ema on weekly along with .618 fib level. RSI is slowing down on GOLD creating a price/momentum divergence, while on S&P is kinda quiet with volume decrease still being bullish and above 50.
IDEAS:
I would consider GOLD being better candidate to come down first due irrational market sense and due exhaustion at mentioned levels. If we get 1800 we will probably see many investors cashing out on their profits and pump in equities since it's likely 3k breakout will happen at the same time. However I beleive that won't last long since FED looks to ease down a bit with their spending and trade wars are weighting a lot on current sentiment, so stocks should follow afterwards. If vice-versa scenario happens it's best to wait for central banks next decision which might go towards even negative interest rates to save the economy and pump the stock market, so correlation will follow back.
After key levels I will update analysis and possible trades.
Last equity fall got many investors selling gold at the same time to cash out to meet margin calls for their equities instead of just selling them. Usually what happens is that GOLD sharply rises back and equities barely.
Another thing is GOLD is the original and probably the best liquid alternative, and seems investory rely much more on GOLD than on bonds for example, and that points out how much this crisis and situation is uncertain. That has been going on for a while, because wherever you look you see negative yields or small yields, but not on GOLD.
The real question here is what could go down first, equities or GOLD? It doesn't take some wisdom to conclude that this money printing and expansionary monetary policy is not something to be taken for granted. It never was! Equity rally driven by low rates and bond buying programs seems to have got us to the point where we should re-consider valuations and try to figure what the next move will look like.
The SPX/GOLD ratio fell underwater since consistent wave of appreciating since 2012 and now currently sits at 1.7 below 1.8 support confluence level. If stock market goes down another time, we probably could see same scenario happen once again, but this time with much smaller correlation since I beleive most of investors already took their losses into the account and cashed back into the gold and other safe havens waiting for such scenario to happen. But this is also ''a sword with two ends' since it's yet unclear which side will prevail.
TECHNICALS:
GOLD is slowly going into 1800 confluence, while S&P is near 3k which is also huge confluence level. 20/100 ema's are well supporting GOLD for quite some time, while S&P is being held by 100ema on daily and 20ema on weekly along with .618 fib level. RSI is slowing down on GOLD creating a price/momentum divergence, while on S&P is kinda quiet with volume decrease still being bullish and above 50.
IDEAS:
I would consider GOLD being better candidate to come down first due irrational market sense and due exhaustion at mentioned levels. If we get 1800 we will probably see many investors cashing out on their profits and pump in equities since it's likely 3k breakout will happen at the same time. However I beleive that won't last long since FED looks to ease down a bit with their spending and trade wars are weighting a lot on current sentiment, so stocks should follow afterwards. If vice-versa scenario happens it's best to wait for central banks next decision which might go towards even negative interest rates to save the economy and pump the stock market, so correlation will follow back.
After key levels I will update analysis and possible trades.