A Dollar/Gold Double From Zero Hedge

From the unwinding-of-the-carry-trade department, Zero Hedge makes a point of noting the correlation between a surging greenback and a plummeting stock market. With regard to the latter, the much-awaited correction is upon us.

"Tyler Durden" is best presented using his own words:

Who would have thought that the much anticipated European contagion would actually arrive. It was priced in right? Algos and correlation desks are flabbergasted that this is one situtation that the Fed apparently is helpless with. And if it does, it would only be dollar positive and stock market negative. Indeed, regarding the first, the dollar is now back to July 2009 levels.

Graphs included.


An earlier post discusses the same steath rise I myself have noted: ex-greenback, gold is rising. Again, in his own words:

...The preliminary conclusion [as to why gold was only down to its December lows while the U.S. dollar vaulted up to highs not seen since last August] is that gold has proven quite sticky at the top, even as the dollar has regained some of the investing public's confidence. One reason for this may be gold's slow start to the upside as the next chart demonstrates. Gold only commenced its nearly parabolic rise in September, a time when the dollar was already substantially weaker compared to its March highs: if appears it took quite a bit of time for gold investors to realize the potential ramifications associated with the dollar's weakness, and how to hedge appropriately.

In other words, the earlier fall in the greenback took some time for the market players to get adjusted to. Gold was a late-train hedging theme.

The rest of the post discusses silver and oil in a pair-trades context.


[Edit: I didn't catch it at the time, but the stickiness has turned into an air pocket; gold got crushed this morning. The same lag effect, noted in the above quote, evidently works on the downside also.]