V.16:10 (482-485): Is Gold Still a Barometer by Alex Saitta

Is the gold market still an indicator of other trends? Here's a look at the past relationships of gold to the dollar, the Consumer Price Index and the CRB.

Analysts often cite intermarket relationships when touting a market’s prospects. An analyst might point out that utility stocks have reached a new high, and since they lead interest rate instruments, the fixed-income market would follow. Or an analyst might observe that copper is down, and since copper is a key price component for inflation indices, lower copper prices is bullish for bonds. When you examine the historical data and compare the impact that one market may have on another, however, some such relationships do not actually exist, and further, most of the relationships that do are not strong. But some do, and they are worth noting. One key barometer is the price of gold. After the inflation-ary period of the late 1970s and early 1980s, the price of gold as an intermarket or inflation indicator fell out of favor among Wall Street analysts. If you examine the data, however, you’ll find that gold is as valuable an indicator as it ever was.