A Tale of Two Market Declines

The primary decline in the earlier "correction" of markets that began late February this year can be defined by the 9 trading sessions beginning February 21st and ending March 5th. Over those 9 days the US S&P500 declined 5.86% on a closing basis. The Precious Metals--Gold and Silver--declined quite similarly. As measured by GLD (Au) and SLV (Ag), the US ETF's, Au declined 3.64% and Ag 9% (I have documented elsewhere in this blog how Silver regularly displays a higher "beta" than Gold--that is, Silver declines deeper and rallies higher relative to Gold). An average of these two PM's giving a 50% weighting to each would create a composite PM decline of 6.32% Very closely matching the decline of the S&P500 during that same period. This was a trying period for many of the PM's most ardent bulls. In fact, most of the first half of 2007 has been a challenging period for investors focused on the Precious Metals. Has something changed now though?

Flash forward to the market correction beginning in these last days of July. Measuring the decline in the US S&P500 beginning from July 18th and ending as of the market close on July 31st, the decline so far has been 6.08% in stocks. This time around, GLD and SLV have held-up much better based upon this admitedly narrow comparison. Over the same 10 trading sessions the PM ETF's have essentially been flat. GLD gained 0.06% and SLV lost 0.10% Creating a 50/50 weighted composite average of -0.02%

Something would appear to be different between these two "market corrections" in the first 7 months of 2007 when viewed from the context of the relative performance of Au and Ag. Expect the unexpected.