In the beginning, which, for the purpose of this analysis, we would point to as mid-July, when the credit crisis began laying waste to markets around the world, gold closely tracked equities.

As the Dow was plummeting from 14,000 to less than 12,500 (nearly an 11% haircut), gold was also dropping, though not so steeply. The metal fell from a high of $683.50/oz on July 20 to an intraday low of $640 on August 16, a decline of 6.4%.

For a while, the correlation remained tight as investors rode alternating waves of optimism and pessimism about stocks and gold. Equities up, gold up. Equities down, gold down. Set your watch.

This correlation was due to a number of factors.

For example, the need for hedge funds and other institutions to sell anything with a bid - for instance, gold - in the scramble to build liquidity in suddenly (and surprisingly so) illiquid bonds and commercial paper.

Pressure on both equities and gold at the time can also be attributed to the dawning realization that (a) the credit crisis was real and, (b) it probably wouldn't be terribly helpful to the global economy. Of course, when one worries about recessions and such, one thinks less of holding either stocks or gold. The former for the obvious reason that bad economic conditions make for bad business; the latter because anything that is supposed to be an inflation hedge can't also be a deflation hedge, can it?