GOLD IS BECOMING A SAFE HAVEN ASSET AGAIN
6 February 2012 by Sober Look
3 Comments
By Walter Kurtz, Sober Look
On Friday gold was behaving in a more traditional fashion, moving in the opposite direction from copper. With copper viewed as a “risk” asset and gold a “defensive” asset, the two should generally trade with a negative correlation.
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| Gold and copper futures (Source: Bloomberg) |
This is quite a contrast to the recent price action, with gold trading more like an industrial metal, driving gold-to-copper correlation to its highs.
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| 120 day gold – copper correlation |
It’s not at all clear if today’s action indicates the beginning of a reversal in this trend. The decoupling of the two metals should make gold more attractive again as a “safe haven” investment, providing a real hedge to a risk portfolio (of equities and commodities).
Copper tracks e.g. the S&P 500 remarkably well. But gold is moving in its own orbit. Unless liquidity start to shrink, then both copper and gold WILL be hit. I am actually considering going short gold again.
gold has tracked not as a safe-haven but instead as a risk asset since the commencement of easing policies by global central banks. so just the same way stocks / hy / copper rip on the idea of zero rates, asset purchases and liquidity injections, it moves higher in conjunction with them as it’s the currency debasement and inflation hedge. period.
as long as the real interest rate is below 2 and especially below 0, gold will go up.
tho not in a straight line, as nothing does.