I am watching very carefully some subtle relationships during this current sell-off in gold, and would like to see if any of you are seeing similar things.

In the brutal sell-off from September to late November, we saw a clear de-leveraging relationship. The DOW would drop 300-500 points in the morning, and we would see a simultaneous surge in the dollar, almost exactly in lockstep, to the day. This suge in the dollar would drigger the sell-off in gold. The simultaneous drop of gold and stocks in general resulted in the near anihilation of gold stocks in particular, as we saw the HUI drop from 450 to 150, down more than almost any other group of equities.

I remember watching the action during these months and thinking of dominos. It was an automatic reaction nearly every time.

I would like to compare this with today, when as I write this the DOW is down nearly 300 points, gold is selling off, and the gold stocks are down more than the overall stock market. Yet, one key difference is, I am not seeing the automatic purchasing of the dollar. The second domino in this chain from last fall is not part of the game. Yes, the dollar has risen over the last few weeks. But my point is that I feel these markets are at least acting more on their own fundamentals presently (as whacked as they are), and not simply all reacting to the last domino.

This is a critical difference.

Note that I am not saying gold may not fall again. It is quite possible we may retest $600 - 700 in my mind, and the gold stocks would be in for another clobbering. Yet I would rather have gold and gold stocks fall for their own reasons than be part of that horrible domino chain reaction. Because to me that means that when they are ready to rise, they can do so on their own.

Hysteria