Goldbugs worried about downside have more to fear with oil at $160, than $85. Ironically all this new oil that has made oil cheap, is not cheap to produce. There is a floor, and $85 is probably pretty close to it, as per Seth's post.
Just stepping back, to plot what most of us already know:
The following charts reference the data with GLD using a moving Pearson's correlation over the previous 13 week period.
Given the time frame used, oil has reasonable positive correlation with gold, often exceeding 0.75 in the positive but never in the inverse.
Commodity bellwether, copper, has lengthy periods of strong positive correlation to gold, >0.75. Inverse correlation over a quarter is much weaker weak, only twice approaching -0.75 in the last 3 years.
The $USD is clearly only strongly correlated to gold in the inverse (<-0.75), and often for extensive periods.
Gold does at times push into strong positive or inverse correlation (+-0.75) to the DOW, GDP, property, and cows.
So if you are bearish on the $US, and / or bullish on commodities, particularly copper, then gold is a good place to punt. At this simplistic technical level, being bullish or bearish on DOW and property should perhaps factor less into any decision on gold.
