BarroMetrics Views: Pot-Pourri Jan 04 2011
6yardsitko raised the question of seasonal tendencies for Gold in September & October.
Seasonal charts tend to vary somewhat in their detail. I use Moore Research Centre Inc because I have found their charts to be the most reliable.
Figure 1 shows the MRCI Seasonal Patterns for Gold for 5, 15 and 30 years. You’ll note that we see lows in Sept and Oct.
Squice wants me to comment on the Gold/S&P inverse correlation.
That’s a difficult question to answer because it is so general. But here’s my best try.
Generally, Gold, Interest Rate Yields and the S&P all rise in the strong section of the business cycle; in a deflationary environment, they all fall; in a stagflation situation, Gold tends to remain in an uptrend while the S&P and Interest Yields tend to move sideways. By sideways I mean you will see their charts reflecting roughly equal highs and lows.
I see the current situation akin the 1966 to 1982 conditions i.e. a sideways market for the S&P and an uptrend for Gold.
Figures 2 and 3 show the S&P and Gold charts for the period. Note that the Gold chart topped out 2 years before the start of the S&P rally.
I should not be taken to say that the S&P/Gold relationship is a fixed one – there will be times when the correlation is stronger than at other times. But as long as we are aware of the stage of the business cycle we are in, the correlation serves a useful function.
FIGURE 1 Gold Seasonal Patterns
Charts through the Courtesy of MCRI
FIGURE 2 S&P 1966 to 1982
FIGURE 3 Gold 1970 to 1980
Charts through the courtesy of The Chart Store