market overview, page-3

mm@mossberg - from my research id say it depends on severity of the correction/crash and how much gold is in 'general' hands leading in

2002-2003 gold rose as the market started to correct hard  because it had been falling for a long time before the start of the big right hand shoulder slide. so not widely owned






2008 gold crashed with the market because itd been rising for 5 years into the correction - then bolted upward coming out of the crash

at a simplistic level - in a crash people tend to sell everything they own thats in 'profit'  to cover losses. and the more widely something is held - the more of it gets sold. so anything thats been in a bull market becomes a victim of selling pressure - the longer the bull run the more widely its owned the more of it is sold

given that analogy if a crash near term I;d expect gold to rise because it isnt widely held.

likewise at this stage gold stocks are at relatively low prices given where gold/silver prices are - so at this point PM stocks i;d expect to rise as well

Corrections of the typical 10-20% variety gold should do well in - corrections dont drive investors from market entirely - crashes do. In a correction investors rotate to risk hedges including gold - but gold is only a partial risk hedge

2008 was extremely unusual though - it was a global liquidity/capitalisation removal as huge debts blew up

normally market corrections and crashes though simply come from markets running out of steam - too high a valuation - then a recession or slower growth or too much of rising interest rates cause a shock to future earnings expectations

then the stocks are suddenly seen as mispriced - get sold off aggressively and that triggers further reactions as market switches from optimism to pessimism about future earnings

market typically then overdoes it to the downside in a flood of pessimism and fear - which is when the truly disciplined lt buyers buy ala Buffet buying 5% or whatever it was of Goldman Sachs in 2008/9

As i said the other day - absent a systemic risk trigger - i think the broad equity market will continue higher and up down for a fair while yet.  ECB and BoJ central banks globally still pushing more liquidity in than US is withdrawing

but market is now expecting ECB to announce  thast will slow drastically or even halty by end of the year. Once ECB stops - BoJ wont be enough by itself.  BoJ likely to keep pumping longest simply because it wants as low an exchange vs USD as it can get. Futile now though because market sees that and discounts it

So i suspect well see gold pop and PM stocks with it - well before any final right hand shoulder crash in overall market