The stock market and gold

I have been following the development of the global carry trade by watching the correlation of the US stock market and the euro currency. The recent surge of the price of gold makes me wonder if there is somethimng going on there as well.

The two charts below show the US stock market priced in euros compared with the US stock market in US dollars and the US stock market priced in gold, again compared with the price in US dollar. It appears that a correlation between gold and the US stock market has been going on in a similar fashion than the one between the euro and the US stock market. The gold correlation seems to have been even more stable than the euro correlation and it has broken down for the first time in three years only recently. However, the direction of the breaking is the opposite of the one taken by the euro correlation.




For the sake of comparison with another traditional conservative investment, the following chart shows the US stock market priced in US treasury bonds compared with the price in US dollars. Here the correlation is still unbroken.



These charts provide a long term perspective for all the three cases that I am watching.





Categories: stock market, currencies, correlations