Gauging the Gold Trade

Stocks sell off. Bonds bounce a bit. Precious metals spike, then fade. All within minutes of the release of the Fed minutes. With this market, though, all those things may have reversed by the time you read this. Again, we continue to shoot first and ask questions later rather than attempt to understand anything that has been said or written. I don't immediately react to Fed minutes; it is a game I won't play. A few folks I know immediately shouted how dovish these notes are, yet equities didn't respond that way. Let the news get absorbed.

Even though precious metals have been fairly strong, the gold miners haven't been participating. Look at the correlation between the SPDR Gold Trust Shares (GLD) and the Market Vectors Gold Miners (GDX). The drop in correlation actually isn't that important. As discussed earlier, the drop in correlation results in a coin flip as to whether to go long or short GDX here. The important indicator for me is the TRIX, the one I originally followed along with price to get short GDX. This is one of the few positions that I have maintained lately....140 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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