GOLD 0.15% $1,311.4 gold futures

The negative correlation

  1. 3,665 Posts.
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    I kind of having the idea that GLD inventory level is negatively correlated with POG, loosely.

    When GLD inventory was sinking I felt happy, and knew that POG should go up sooner or later.

    When GLD inventory went up to 773tons from 703tons lately, I had that kind of sinking feeling: damn.

    Now my sinking feeling has been confirmed, POG dropped to 1233.


    Now let me explain my theory:

    GLD inventory gold represents gold on the market place, it represent s gold available to market players.

    The market place is designed for gold the commodity, not the gold as money, the competitor for safe heaven asset.

    More gold on the market = plenty of chips to play, to go short gold = pressure on POG;
    less gold on the market = lack of chips to go short = dangerously leveraged market = real gold very valuable.

    So simply put, GLD inventory is a window on the (real gold) liquidity of the gold market.

    And short sellers are very reluctant to short sell issues with no liquidity.

    It's just a theory, and so far it has been proved valid, mostly.
    Last edited by hercules007: 07/02/15
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