Isn't the price of gold supposed to have a negative correlation with the value of the market? : LUSENET : TimeBomb 2000 (Y2000) : One Thread

What happened today did not look like a rally. It looked like a stubborn fight to keep things level with a bump at the end of the day that corresponded to a drop in gold. What does it mean, hell, I am a computer geek not a financial wizard. I can read the graphs and make observations about what I see. I can not tell you what it means.

Perhaps it means that someone dumped A BUNCH of gold at about 15:00 and bought a bunch of stock. That is what it looked like but I suppose many other things would have the same effect.

Another thing that happened today and has been happening for nearly a month, technology stocks are falling notably faster than the rest of the market. Perhaps people's faith in technology has been strained by sky high marketing promises that did not pan out.

For sure, nobody can predict where we will be tomorrow. Some things do seem to have an impact. It appears to me more or less in this order, what the FED does, what Greenspan says, what the leading people in any industry say, what the day trader's software tells them to do, superstition.

In looking at the graphs I also saw a strong positive correlation between the price of gold all day and the value of the market. I don't really understand this but I am totally stupid when it comes to the market. Either people bought gold when the market was going up or they sold gold when it was going down (which seems counter-intuitive to me). At the end of the day though (the last hour and a half of trading) gold went down and the value of the market went up.

For my money, of which there is very little, my guess is that someone wanted to open tomorrow with the market in a better position than it did today. A message was sent to the masses.

Is this a reasonable description of what the market did today? Why would gold go up and down nearly in lock step with the market and then suddenly at the end of the day the market goes one way and gold goes the other?

-- Michael Erskine (, October 18, 1999


Michael: Just some points to ponder. "They" are desperately trying to keep the DOW Industrials pumped up. But also look at the NASDAQ. That's where the REAL companies are. Tanked today.

Both stocks and metals go up and down within their separate trends. On any given day, they can move together. Or not.

In following (and trying to predict) market movements, two methods or analysis are used. Fundamental and technical. Fundamental deals with the longer term prospects, but the timing is nebulous. Technical analysts look at chart movements and attempt to predict the price tomorrow if such-and-such price and/or volume action occurs.

So we have a situation where, fundamentally, the stock market will go down, and the metals up. (According to some of us.) That could be tomorrow, next week, or next year. So, today's action, or tomorrow's is rather immaterial, except to those who are actively trading, trying to catch a few cents' or a few dollars' move.

This all assumes that we continue to have a functioning market (which could likely be a faulty assumption). Prices (of stocks and gold) are denominated in fiat (funny money) currencies -- US$, Pounds, Yen, etc. These currencies are based on nothing except hype, hope, and habit. If everything tanks, it's gonna be difficult to measure the "price" of anything. What will be the yardstick? It won't be the US$, etc. Now, will the price of a roll of toilet paper be 1 gram or 10 grams of gold? Who knows. All we can say is that the metal will have SOME value, while the currencies will have NONE. Even though people may accept currency out of habit for awhile.

-- A (, October 18, 1999.



The Dog

-- Dog (Desert, October 18, 1999.

In the end, when and if, a society is reduced to barter, the most valuable things will be the most commonly needed necessities which can not be readily produced or obtained without a functional industrial base. One can't eat gold but a pound of lead might be traded for five gallons of gasoline. If there is a sudden crash chaos will result. If on the other hand, a spiraling down occurs over a longer period, what then? It depends upon how deep the spiral and how long the period of that decline. Initially certain items currently commonly used and difficult to produce without a strong technology base will be highly valued. As time progresses and supplies run low, where people are forced back into a more harmonious relationship with nature, lower technology items could become more valuable. In other words a thousand rounds of 12 Gauge shotshells boxed and put away ten years could be a much better long term investment than gold. This is pure speculation on my part. Sort of a 'thought experiment'.

-- Michael Erskine (, October 18, 1999.

Michael: Gold has retained its allure for over 5000 years. You can't eat it or grow it but men still want it. If you have a 1/10 oz. gold coin, you will be able to trade that coin for many useful things in 2000 and 2001.

-- cody (, October 18, 1999.

Michael .... You may not know how to read the charts and interpret same for finanical gain , but I would bet on you any day to have the right articles for "trade" when that time comes. In fact, if you were part of my little community (kingdom ?) , I would not hesitate to make you ' Minister of Trade ' for as long as you desired the job !! Put aside what you can, and "trade up" for what you need. It IS coming to THAT ! Eagle

-- Hal Walker (, October 18, 1999.

Watched the market all day, as I have for the past 20 years. Things didn't look normal today, something really out of wack. Considering last weeks performances, I wondered it they were trying to avert a hard crash and were using gold or metals to prop the market up. Was going to buy some silver today, but decided to wait for a while to see how this shakes out.

-- Nancy (, October 18, 1999.

Greenspan and Gold On October 14, 1999 Fed Chairman Greenspan delivered an extraordinary warning to bankers about the need to prepare for a finanicial crisis, market crashes and panic. The Fed Chairman's speech, "Measuring Financial Risk in the Twenty-first Century", was extraordinary in several ways :

1) The Fed Chairman sounded the alarm about a real possibility for a collapse of the financial markets. Unlike other Fed-speak, Greenspan's speech was unambiguous...his message clear. 2) The Fed Chairman pointed out that such a collapse can occur anytime...without advance notice (hint, hint...nudge,nudge). Clearly, Greenspan is warning these bankers that the potential for collapse "anytime", includes the coming weeks or months . 3) The Fed Chairman is talking openly about potential "panic" in the markets. 4) The Fed Chairman warns about "a bursting bubble" in the tradition of "Dutch tulip bulbs or Russian equities." 5) The Fed Chairman tells bankers they need to prepare for a systematic failure, across all markets, affecting "even a seemingly well-diversified portfolio."

It is extraordinary for the Fed Chairman to clearly and unambiguosly warn about market crashes, financial collapse and panic. It is extraordinary for the Fed Chairman so publicly to warn banks about the need to prepare for a finanicial crisis, market crash and panic.

What has prompted the Fed Chairman's blunt warning and urgent call for action?

First, the bankers and other financial institutions have not taken sufficient action based on Greenspan's previous warnings. As Greenspan states , "I have called attention to this risk-management challenge in a different context when discussing the roots of the international financial crises of the past two and a half years. My focus has been on the perils of risk management when periodic crises--read sharply rising risk premiums--undermine risk-management structures that fail to address them." At the time of the LTCM debacle, Greenspan issued some warning about risky financial shenanigans, including derivative trading. Greenspan warned that failure of the relatively small LTCM could lead to failure of much larger financial systems. However, after the LTCM crisis, many banks and "risk-management structures" have failed to address Greenspan's warnings.

Secondly, a new crisis, much larger than LTCM, looms before the Fed Chairman. A clue as to nature of this crisis can be found in what Greenspan, on October 14, 1999, tells the bankers to do:

"At a minimum, risk managers need to stress test the assumptions underlying their models and set aside somewhat higher contingency resources--reserves or capital--to cover the losses that will inevitably emerge from time to time when investors suffer a loss of confidence. These reserves will appear almost all the time to be a suboptimal use of capital. So do fire insurance premiums. "

The Fed Chairman wants the bankers and other "risk managers" to "stress test" their assumptions and models. Where have the words "stress test" been used in the past couple of weeks, just before Greenspan uses the same words. Ashanti Goldfields recently suffered a large drop in its stock price despite the sharp rise in gold prices. The drop in Ashanti's stock is due to Ashanti's hedging program. Recent reports indicate someone from Ashanti said that Ashanti had "stess tested" it's hedging program for a $50 rise in gold but not for a $70 rise in gold. Recent reports indicate others invloved in shorting gold or hedging had not "stress tested" their strategy. The bullion bankers are vulnerable to billion dollar losses due to rising gold prices.

The recent run-up in gold prices has caught bullion bakers, derivatives speculators, and other gold shorts in an historic squeeze of monumental proportions. The Fed Chairman, privy to specific information he can not divulge, probably sees a clear risk for financial collapse larger than the LTCM debacle...a collapse which even the Fed with all its tools can not prevent.

While he does not want to divulge company-specific horror stories, the Fed Chairman probably feels compelled to at least warn the general public in some way. And that is a reasonable explanation for his October 14 speech, publicly admonishing the bankers to reduce risk and increase reserves. Greenspan may also be thinking about his "legacy". If the financial markets collapse and some banks fail, the Fed Chairman would be able to say that he warned the banks and the public.

The media justs reports on the effects, but not the content (stark warning) of the October 14 speech. Read Greenspan's blockbuster for yourself. The text of the Oct 14 speech is at:

-- nospam (no@spam.spam), October 18, 1999.

Probably some banks and brokerage houses were pulling out of metals to get liquid for stocks as Greenspan warned them to do on Thur nite. Remember? The big boys still are in control, albeit marginally. Technically, gold is on the edge of a cliff...dropping much more right now in the next few days could turn the oscillators negative for gold. At the moment, most remain bullish long term, but that could change within the next few trading days or sooner if Gold tanks below $310 or $300. Gold MUST start moving UP in the next few days to keep the bull alive.

-- Dick Moody (, October 18, 1999.

Gold -- and even more, silver -- is a BUY right now. And if it drops again, an even better buy. Decide if you are a short term trader or long term holder.

BTW -- Decker -- Anyone who BOUGHT gold at the ~$800 mark, instead of earlier, years back was a fool (or at least very inexperienced). So your point of not yet being even is moot. Should have bought earlier, and SOLD some at the ~$800 mark, or forget it, missed the move. We are in a position again, where it is like before the runup to ~$800.

Remember to make money, you got to buy low and sell high. If you're a "long" that means buying low, first, and selling high, later. This is the only way a "little guy" can do it with physical metal. That means buying NOW, and scraping up some more and buying more if it does drop again.

-- A (, October 19, 1999.

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