When Gold And Stocks De-Correlate

Tyler Durden's picture

The structural collapse in paper gold prices has been met a seeming 'money-on-the-sidelines' flourish of investors looking to buy the physical asset. However, when asset relationships break-down so significantly, as gold and stocks have in the past 90 days, one has to take a step back and think "what changed?" As the chart below shows, the last time the correlation between stocks and gold was this negative, things did not end so well for the high-valuation equity momentum chasers...



And just for fun, from Barclays' Jordan Kotick, the last time the commodity/USD relationship broke down to such an extent was just ahead of the 2008 equity market decline.


It appears things have 'changed'...


Charts: Bloomberg and Barclays

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SolidSnake961's picture

it is just a transitory issue

LetThemEatRand's picture

What are you going to do [market], bleed on me?

Thomas's picture

I've spent years building a portfolio supposedly uncorrelated with the S&P. I've finally achieved it and discovered that it is painful. 

Thomas's picture

I have begun wondering what a dislocation between paper and physical gold would (will) look like. Physical shortage strikes me as the most likely. Drop in paper gold was one I pondered. I've begun wondering if we are seeing it finally. Too early to say for sure but some of these symptoms are suspiciously similar to my best guesses. Any other symptoms come to mind?

Missiondweller's picture

I've wondered the same thing and came to the same conclusions. Its already happening to gold & silver on the retail level. I had assumed it would show first on the wholesale level first. I've been looking for some signs of that but its not like you hear about China bitching about paying $100+ ounce premium to have the physical delivered since they are accumulating quietly. Maybe we will hear about wholesale premiums in silver from electronic or solar makers.

I definitely think you're on the right track.

Ying-Yang's picture

shrubbery.... you mean bush? Sure blame bush (sarc)

midtowng's picture

global economy going into recession and commodity prices crash and treasury yields approach zero.

Why shouldn't the stock market keep going up under these conditions?

derek_vineyard's picture

gotta call you on this one tyler----according to this chart stocks were undervalued for several years; the crossover occuring near start of 2013.  thus you are hypocrites.....you should have been pushing equity under-valuation pre 2013.

hey pussies---refute my comment, don't sheeple to tylers with arrow down

EclecticParrot's picture

It appears our friend Derek may be drinking up the 'vineyard''s profits, rather than focusing on picking the grapes, which is likely his role if he doesn't understand that correlation doesn't equal causation, and that the graph is more a statement of the respective positions of gold vs. stocks as "safe haven" investments vs. "risk on" vehicles, and one lagging the other during positively correlated periods doesn't indicate undervaluation.  Instead, it seems Mr. Durden may be suggeting gold often leads stocks in evidencing the relative "risk off" trade.  Now then, don't throw out those skins, our we'll all be stuck with insipid, sweet white elixir.

derek_vineyard's picture

chart porn....tyler's uses it all the time, but only picks  the portion of the chart that supports his conclusion.  and the conclusion is that the sky is falling (of which i dont necessarily disagree) but tylers shouldn't twist every chart/news item/world event to support their pre determined non negotiable conclusion.  sf giants lost 4-3 yesterday and look at my chart...when that happens the probability of a world collapse has been made greater.

Ying-Yang's picture

chart twisting is understood in the fight club

Smiddywesson's picture

Derek's got a point there.  This can be a scary bear site, and when you are a scary bear, you'll find a scary argument in every chart.  Whether that's exploited intentionally or not is up for debate, but not by me, because I'm a scary bear.  LOL

Jack Napier's picture

It doesn't take a rocket scientist to know that 400 times leverage = eventual run for the underlying assets with broken counter party risk chains. The fix for collapsing bubbles was a bigger bubble, how ingenious.

Consider that the only reason ZH has its membership is because they are highlighting what is going on. If the sky wasn't falling nobody would know about this site.

Gazooks's picture

dereek isn't harvesting or drinking, just now pissing and lurking the men's room

derek_vineyard's picture

the tylers want a world collapse because their ego is so large that they'd rather be right than alive.  everything that happens is all a precursor of doomsday.  and they offer no real solutions....except to root for a crisis.  watch out what you wish for so the cliche goes.  tyler's have been wrong on almost all market calls for 5 years .....the ego is all that matters now. 

RSBriggs's picture

The Tylers are authors on an entertainment blog owned by a major media outlet.  Doom and gloom and Bitcoin trashing sells clicks.  Unicorn farts and skittles don't.  If it's Unicorn farts you want, you can get that from any lamestream TV outlet, CBS, MSNBS, ABC, FOX, CNN, etc., or the ultimate daily source, the New York Times.

derek_vineyard's picture

i agree....doom and gloom sells

so why the hero worship on this website by the sheeple?

Bizaro World's picture

Derek: So do unicorn farts.  I don't subscribe to the "hero worship" idea but do think there are serious problems in our financial system and know the main stream media presents rose colored canned responses/explanations that consistently favor banks and/or politicians. Tylers present the flip side.  But there are so few news outlets that present the flip side, and even fewer that can give you a chuckle while presenting it.

Present a better alternative for real financial news with some humor or quit bitching about the Tylers.

Doña K's picture

derek, the point here is that basically we are all wishing for a better government by exposing the fraud and trying to be funny and sarcastic at the same time. ZHedgers are not necessarily traders or even high roller investors. They are mostly switched on individuals who can thinkfor themselves and they mostly have like minded opinions. Your opinion can be heard here but don't be accusatory. Just make some comentary backed by some of your own facts and then pehaps you may see fewer down arrows.

Some of us have been here for 3 years or more and we have seen people coming in and finding the light about evil.gov

over to you.

derek_vineyard's picture



ive been a contrarian for decades........but this blind hero worship of everything written on this site has become absurd

Doña K's picture

Your opinion is respected. But don't forget you can turn ZH off just like most of us turn off CNBC. But at least here you can read very funny stuff very often, no matter what you believe. Vis a vis Bonzai 7


SpiceMustFlow's picture

I'm not high net worth and struggle with some of the charts occasionally, but I enjoy ZH mostly (maybe 60-40) the funny comments. After finding ZH I can't read the comment section anywhere else, so regardless of whether the vast majority here are like minded and therefore susceptible to the tylers' chart porn, it's nice to have a forum where you aren't dealing with the mental dregs of society.

Quinvarius's picture

The economy actually is as bad as this site portrays.  Being a contrarian for the sake of being a contrarian is not a winning game.  The financial graves are full of contrarians.  You become contrarian when the crowd is doing something facts don't support. 

If you want to be a contrarian, watch this series:  http://www.youtube.com/watch?v=Q8e-e9xtFWA  You will know what to do.

A. Magnus's picture

Blind hero worship? Where the fuck are you finding THAT besides the mainstream media in regards to everything Obama? I've been carousing these forums for a couple of years now and I have YET to see a single person offer to let the Tylers teabag them because of their sterling market acumen.

If you're gonna make accusations you might want to offer something substantial...like say EVIDENCE...post an example or kindly SHUT THE FUCK UP.

Thank you...

Hmm...'s picture

I agree with Derek.

on the one hand, stocks evidently correlate VERY closely with Gold

thus, when gold breaks down like this one would expect Stocks to also fall.

however: another way to look at this data set is that the same inflationary pressures that have shot stocks to the moon...

also shot gold to the moon.

I personally own a lot (for me) of gold (about 50 oz) and no stocks.  (my IRA is filled with CEF and my 401k with short term Government Bonds).  I have no debt (everything paid and clear including house).

thus I prefer for gold to do well and for stocks I could care less... 

but one must understand that we are clearly in an era where the Fed has forced asset prices up up up.  that includes equities, house prices, gold, silver, paintings, and everything else under the sun.

Oil is a somewhat special case given that there is a downturn (crash?) in worldwide first world demand right now.

Bay of Pigs's picture

FED forcing gold and silver up?

That is absurd.

Hmm...'s picture

"FED forcing gold and silver up?

That is absurd."

have you not been paying attention?  you don't think any of the liquidity pumped into the market by the various Central Banks found its way into commodities including Gold? 

4 words for you:  Paulson's billion dollar loss.

you think he's the only hedgie in the gold space right now (paper and physical)?

there is rampant price appreciation in almost ALL assets, INCLUDING Gold and Silver.  Much of this is Fed Induced.  Sure, the Fed doesn't WANT the money going into gold... but go there it will.
(Why do you think I have bought 50 oz of PHYSICAL gold since 2009?)

Bay of Pigs's picture

The gold bull market started way before trillion dollar deficits and QE. GLD and SLV are paper shams and frauds and are being used to suppress the price.

James_Cole's picture

Derek is right and you are correct:

but one must understand that we are clearly in an era where the Fed has forced asset prices up up up.  that includes equities, house prices, gold, silver, paintings, and everything else under the sun.

It's called leverage, nothing is immune. Seemingly 99% of the commentators on here cannot understand this simple concept. 

Bay of Pigs's picture

ZH has covered the gold story quite well for years. Maybe you should read some of those posts and get up to speed?

derek_vineyard's picture

james-----everything appears overpriced to me.  i see no safe harbor.  i would say if i could store a variety of commodities i would at least break even with inflation or deflation.......but that really isn't physically possible.   all other investments are pure gambles today and i see no high probability long term strategy.  ive advised my son to spend all his money and enjoy....dont invest in anything currently.

Gazooks's picture

no 'safety' for anyone, but your son still deserves better advice if he intends any future.



cspg's picture

supply shock risk. hoarding in 2008/liquidating today

GoldForCash's picture

Want to make money this Time around? Place your bets in the opposite direction that money was made in 2008....

GoldForCash's picture

Want to make money this Time around? Place your bets in the opposite direction that money was made in 2008....

Dr. Richard Head's picture

All printers on deck......All printers on deck!

TeamDepends's picture

Where's Jerry Lewis?  We could have a Labor Day Printathon!  Oh, wait....

xtop23's picture

QE4 incoming. $85 billion a/mo ain't cutting it.

css1971's picture

Japan is doubling that all on it's own, no?

McMolotov's picture

We should start naming QEs the way we name storms, and we can choose the names of those people who've done the most damage.

i.e. QE Alan, QE Ben, QE Cuntface (that's for Obama), and so forth.

I am more equal than others's picture

Remember to categorize:


Cat 5

Cat 4 - I think Katrina was a Cat 4 at landfall. 

Cat 3, etc.


Wile-E-Coyote's picture

Lol....... I nearly spat my beer out at "Cuntface".

reload's picture

Wether the Gold decline was intentional (and incidentaly I am not in the conspiracy camp - but the, what hidden liquidity crunch just happened? one) or not - the money on the sidelines ready to pounce on cheaper physical will not have gone un noticed.

It will prompt two emotions in our financial overlords - fury that jo blogs has any disposable to spend on barbarous relics, and fury that he has not been successfuly hearded into the Equity shearing pen.

bnbdnb's picture

Reserves, reserves, reserves. Crash won't happen. Slow melt to a new correlation, maybe.