Markets Hinting QE3.

Markets including inflation sensitive gold has been rising since last month. Chairman Ben S. Bernanke will speak in Jackson Hole, Wyoming, on Aug 31 and there are expectations that some kind of stimulus package will be announced. For some perspective we have added a chart below showing correlation between SPX index and XAU (gold). There was a strong negative correlation between SPX and gold during 2008/2009 as gold is considered a safe haven during market turmoil. But the correlation became positive after 2008/2009 as FED increased it assets exponentially (represented by Green line).The recent surge in Gold and SPX suggests investors are anticipating another round of stimulus.