The bold think while the skittish panic.
What are the bold doing? They are thinking about the negative correlation between consumer expectations and gold. That is, they recognize the potential for gold to pause or correct as consumer confidence approaches an extreme low. This is the obvious interpretation.
The real thinkers go well beyond the obvious. They also see a big exception to this correlation. Consumer expectation reached an all time low in 1979.07 at 44.2. This extreme reading preceded an upside explosion in gold from an average price of $295 to $675 within six months. That would be comparable to move from $1573 to $3600 by January 2012.
An all knowing crystal balls does not exist in the real world. Some claim the magic 8-ball comes close, but questions more sophisticated than "does Johnny like my new Justin Bieber t-shirt?" tend to produce vague and non-actionable responses. The real world is defined by probabilities and strategies designed to exploit them.
University of Michigan Consumer Expectations (CE) and Gold: A Correlation Study
Headline: U.S. Consumer Sentiment Falls More Than Expected to 54.9 in Michigan Index
By Jillian Berman - Aug 12, 2011 7:03 AM MT
Confidence among U.S. consumers plunged in August to the lowest level since May 1980, adding to concern that weak employment gains and volatility in the stock market will prompt households to retrench.
The Thomson Reuters/University of Michigan preliminary index of consumer sentiment slumped to 54.9 from 63.7 the prior month. The gauge was projected to decline to 62, according to the median forecast in a Bloomberg News survey.
JB Slear
Fort Wealth Trading Co LLC.
817-717-5489
Fax: 817-764-2537
www.FortWealth.com
Source: bloomberg.com
