I recall that the last time gold sharply rose was back in August when the markets stirred up over theU.S. debt ceiling debacle which was followed by theS&P's downgrade of U.S.'s credit rating. Back then gold price reached a record high of nearly $1,900 the U.S. treasuries yields also fell precipitately as the anxiety level in the markets rose, traders became risk averse, American stock markets plummeted and the demand for safe haven investments was high. Now the demand for U.S. treasuries is high, the American stock markets are falling again, but gold is also falling. Is goldstill considered a safe haven investment among traders?

During November gold and 10 year U.S. treasuries seem to have a strong positive relation and as gold declined so did 10 year U.S. treasuries.

This positive relation is also confirmed when we examine the linear correlation of daily percent changes of gold and 10 year U.S. treasuries yields.

The chart above shows the change in the relation between gold and 10 year U.S. treasuries. During August when the anxiety level in the markets was high, the correlation was negative, i.e. as gold inclined, the 10 year U.S. treasuries decreased, so that the demand for both investments rose. But during October-November the relation turned from negative to positive. It seems as if the relation between gold and U.S. treasuries turned from being complementary investments to substitute investments.

The final chapter is the relation between the U.S. stock market and gold. This relation also changed in recent months from a relation of two substitute investments to two complementary investments.

The change in the correlation between gold and S&P500 is presented in the chart below. During August and September the correlations between the daily percent changes of gold and S&P500 were negative as you would expect for substitute investments, but during October and November their relation shifted to become positive.

All these charts show that it seems that gold has shifted from being a safe haven investment such as U.S. treasuries (assuming you still consider U.S. treasuries safe haven, which I do), to a riskier investment such as U.S. stocks.

The question is what happened in the recent months that could explain this shift in market sentiment?

I think that the recent raises in the gold maintenance margins requirements by CME may have been among the factors to make this shift.The last time the CME raised the margins for holding gold was back in September 24th. It could be that the last margin hike may have pushed many conservative traders to reduce their exposure to gold and thus leaving more risk takers traders.

If the relations among the American stock markets, U.S. treasuries and gold will continue to be as they were in October and November, this could affirm this theory.

For further reading:

Gold & Silver Prices – Daily Outlook November 30

Gold and Silver Prices Weekly Outlook for Nov 25- Dec 2

By: Lior Cohen, Energy Analyst forTrading NRG