Gold has been moving lower over the last few sessions, even as stocks have been moving into bear territory. One would naturally think that the opposite would occur, as gold is often considered a hedge to a falling stock market. However, at some point gold and other hedging currencies start to fall as well. Stocks are down 20% from the highs. Margin calls are being called in and people need to raise cash. One way that traders will begin to raise cash is to sell gold. On Thursday’s cash market open at 8:20 EST, gold sold off from roughly 1640 down to 1605. It was down over 3% near 1589 as of the time of this writing. On a 240-minute chart, we can clearly see the how stocks and gold are now moving together. The correlation coefficient is back above +.50. This indicates that more than half the time the 2 assets are moving together. We can see that before March, a majority of the time the 2 were inversely related.
Daily Bitcoin And The U.S. Dollar
Source: Tradingview, FOREX.com
On extreme days like we’ve seen this week, when fear and greed rule the markets, technicals don’t matter.
There are three things I would add:
- TRADE SMALLER SIZE TO COMPENSATE FOR THE VOLATILITY
- USE STOPS
- PRESERVATION OF CAPITAL IS KEY. MAKE SURE YOUR ACCOUNT IS AROUND TOMORROW TO TRADE ANOTHER DAY
Even as stocks continue to trade lower, the traditional hedges aren’t there today. Practice safe trading!
Source: Investing.com
