US futures are up nicely this morning, as is gold, jumping to over $1660/oz.
Equities and gold have been behaving the same way for a while, going up on “risk on” days and falling on the opposite.
We’ve talked about why this is before, but we thought we’d just touch on it again.
Basically, with all the crises and economic landmines, the fundamental question investors are constantly grappling with is: How many dollars do I need to hold?
Some days investors want more dollars, so they sell everything else. Some days investors feel they need fewer dollars, so they buy everything else. Thus everything moves in correlation against the dollar. Note that today, even the Swiss Franc is up sharply, despite it being seen as a Eurozone safe-haven, and despite the fact that Eurozone markets are rallying.
Until investors relax, and stop making decisions so directly based on safety and liquidity, we’ll probably see this ongoing correlation.