Dollar Down, Gold Down; That Can't Be Right
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Gold is lower along with the dollar, which leaves many scratching their heads thinking that can’t be right. Correlations with different asset classes are not guaranteed to work day to day. Eventually correlated assets will resume their relationships over a long period of time, but not necessarily day to day
Market expectations are the same as assumptions of what the future will bring. Look at JP Morgan, which had earnings on Friday. Expectations were that earnings would be good; they were, and the stock tanked. That should be no surprise because the good news was already priced in and the news didn’t beat the expectations. They underperformed based on what was expected.
Dollar-denominated gold will not always react immediately to the movement in the dollar. There are other factors in the short run that affect the price of assets. Over the long run, the relationship will come into line and the markets are always right. The dollar and gold are both in congestion and the day-to-day movement is meaningless until they break out of this pattern.