A good read.
After reading Mish my take away was that in financial stability Gold becomes the industrial market and in times of financial distress Gold becomes money. So we are really watching two markets here, the role of Gold in money remains dormant when fiat systems seem stable.
Looking at Gold vs Oil.
Comparing the oil and gold charts above, notice that they track until mid-2008, then they decorrelate. What happened is that the financial distress causes currency uncertainty leading to the emergence of a dormant 'gold is money' market. After mid-2008, told switches entirely from its industrial use to its monetary use. Two completely different markets.
The bull market in Gold comes when it is needed to store value, temporarily, like the Chinese do to offset volatile currency. So during periods of financilal distress, industrial users of Gold delay their work as Gold is diverted to the money market. As recovery begins, industrial users of Gold get the stuff cheap and their business booms.
Update:
FT reports tha India's central bank buys $6.7 billion of Gold swapped for dollars:
"India’s decision to exchange $6.7bn for gold equivalent to 8 per cent of world annual mine production sent the strongest signal yet that Asian countries were moving away from the US currency."
So short the industries that are heavily dependent on Gold as an input.
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