Gold shifts to negative beta vs. stocks

Gold’s correlation with stocks comes and goes — sometimes it’s extremely high, sometimes negative and sometimes it has none at all. It’s been pretty high for much of the last 12 months, but has turned negative since March. At times on a minute-by-minute scale it moves almost tick for tick opposite stocks (much like the treasury bond or Japanese yen).

5-day view:

12-month view:

-
To me, the temporary nature of intermarket correlations means trading each market on its own technicals.

Double top in Gold, like July-March ’08?

-

Very high sentiment readings last week, up to 20:1 bulls:bears. Quite a change from a few weeks ago, when traders were bearish by 4 or 5 to 1.

If the tide is turning back to the deflation trade, expect a rout in commodities like the second half of 2008. Yes, gold rose as stocks and other commodities fell last week, but it did the same thing when it first broke $1000 in early 2008 as stocks fell into the Bear Stearns crisis. The corellation with stocks could easily switch positive again as it did in ’08.