[e-gold-list] Curious new thing

[Paul Davis]

Ever since the big stock market downturn a few weeks ago, I've started
noticing something that seems to be completely new: The price of gold seems
to be working in tandem with the US stock market instead of in opposition. 

The old, opposition pattern made sense from the idea that as people pulled
their money out of stocks they bought gold as a safe haven -- a place to
ride out the storm so they could preserve their value and come back and buy
some bargains later.  Then, as the prices of stocks started going up, sure
enough, the price of gold would go down to reflect the selling of these
safe-haven investors.

So now I'm asking myself (and not getting any answer!), "What has changed?
Why aren't these investors buying gold when they sell their stocks like they
did before?  What are they doing with the money? (Bonds went up when stocks
went down, but I don't think the amount reflected a significant proportion
of what came out of the stock market.)  All that's left would seem to be
cash, and that leads to the question, "Why are investors now deciding that
fiat money is a better safe haven than gold?"  And, futhermore, "Why did
gold investors decide that the decline of the stock market was a signal to
dump their gold -- and the resurgence of the stock market a signal to buy it
back again?"  That seems totally counterintuitive to me!

No matter how I turn this over in my mind, I can't come up with a logical
explanation for it, so I'm turning to this list to see what wisdom can be
pulled out of the woodwork here.  I have a feeling that if we could
understand this change, we could all profit nicely -- both in the stock and
the gold markets.

Anybody?

Paul Davis

PS: Something else I noticed: The ratio of silver to gold seems to be
tracking very closely with the movements of gold vs. USD.  For example, when
gold and the stock market was doing really well right before the Chinese
scare, silver was about 2.12% of gold.  When stocks (and gold) turned sour,
silver dropped down below 2% -- maybe about 1.95 or so.  Then, when stocks
and gold starting coming back up, silver moved back up over 2%, where it
remains at this writing. Correlation signifying something?  I wish I knew
what!




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