How Gold Might Behave If Risk Assets Plunge …

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I think everyone has noticed gold’s underperformance in the last several weeks.  The yellow metal has mostly lost its risk-appetite correlation with other assets.  One wonders if gold will regain this correlation, or if something different should be expected.  In watching the last week or so of price action, gold (and silver) held up relatively well during times when stocks and even some other commodities were falling. Makes sense, considering what I said about correlations above. This suggests gold may hold up better than other assets should risk taking plunge. But does it mean gold can actually perform well in such an environment?  Its connection with the US dollar suggests it can’t.  I included these two charts in an issue of Commodities Essential last week:

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avatarJack Crooks - Black Swan Currency Currents posted Thursday, February 7th, 2013.

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