Every trader in the world follows gold and they should. When gold rallies, or bounces higher it will usually signal that inflation is being pumped into the stock market. The opposite is true when gold declines and sells off, it will signal that the stock market indexes are deflating and will trade lower. Gold is the ultimate barometer of the amount of stimulus that the central banks are creating and putting into the market.
Traders can easily see the move in gold this morning. Once gold started to bounce off of the morning lows the major stock market indexes also caught a bid higher. Obviously, the U.S. Dollar Index sold off dramatically, but that is typical when gold moves higher. Gold is leading the stock markets in both directions. For example, yesterday gold was weak despite the stock market rallying higher, that decline in gold at the end of the day told us that there was a better than average chance that the stock market would come under pressure today. Sure enough, the Dow Jones Industrial Average (DJIA) is trading lower by 240.00 points this morning.
Traders must watch the action in gold. Some good gold vehicles to follow include the SPDR Gold Shares (NYSE:GLD), iShares Comex Gold Trust (NYSE:IAU), and the Sprott Physical Gold Trust (NYSE:PHYS). These equities all follow the spot price of gold very closely.