Gold and Dow the Same Direction

Anybody wanting to know, could have predicted US stocks were going down this morning even before the market opened, based on overnight behavior. It was fun to watch all the option calls drop into red, and all the option puts pop up into green – all in unison, across the board, within 30 seconds of the market opening. What’s more interesting is that gold went down, too.

Usually the Dow and gold move opposite. Here is one write-up describing that moving together happens with deflation (last in 2008) when prices of everything go down.  As I wrote in a prior blog entry, gold and Dow moving together down also happens when the dollar gets stronger (which can also manifest deflation, measured in units of that currency denomination).  And that it is doing compared to the Euro, which is tanking because few see good in financial Europe.

I’m finding the only “bad” thing is that with deflation, the Fed Reserve cannot diddle with interest rates. I’m okay with no diddling for a while.

I guess I hope things deflate a bit, I’ll move some money into stocks, buy some cheap food, pay less for gas, and then watch for things to go back up later in the year or early 2012.