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He looked at the bond yields daily data and the daily gold price data and
calculated correlation co-efficients between them using various time
offsets in the bond data. He had a little table showing the correlation
co-efficients for various days offset between the two data streams. It is
a fairly straightforward process, once you have the bright idea to try
it. I have no idea why Siatta thought to try doing this, but you can do it
with a standard spreadsheet. The bottom line is he found a 65% correlation
between the bond data and the gold data when comparing today's bond data
with gold data from 180 to 190 days ago. That makes gold price a very
significant (statistically speaking) predictor of bond yields approximately
6 months in the future. There is a discussion of this subject at
http://www.equitytrader.com/ including a reference to Technical Analysis of
Stocks & Commodities May '99 - Alex Siatta where Bollinger got the original
concept. There is more info on the concept on www.BollingerBands.com
-uf
At 10:01 PM 5/25/99 -0400, you wrote:
>I was really scratching my head when I heard that piece on CNBC - because
>I chart
>both gold and bonds - and have never seen the kind of correlation he was
>talking
>about. Wonder what his methodology was? Anyway - my conclusion (from a
>lot of
>work) is that anyone who works with bonds based on gold prices does so at his
>peril (but don't take my word for it - do the work yourself). Robyn
>
>Robert Cummings wrote:
>
> > I understand what your saying but he was using yields so both were going
> > down. He said it was the strongest correlation he has ever seen 6.5%. If it
> > worked for the past ten years then it does point to deflation as opposed to
> > inflation. The Feds have changed bias to tighten 15 times in the past but
> > only did 3 times. This could be very valuable information if it's to be
> > believed.
> >
> > Robert
> >
Ullrich Fischer
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