Gold and Stocks Have Been Moving Together for Weeks. What Does It Mean for Investors?
After a drop in its value during the first week of May, gold bounced back to a price of $1741 per ounce merely a few days later.Gold has traditionally been used as a hedge against inflation.
This is why many market analysts had predicted the spike in the yellow metal’s value during these unprecedented times of the COVID-19 outbreak.
But an interesting market trend recorded in the last few weeks is the upward movement of both—gold and stocks.This spike in these two has been the cause of rising uncertainty and confusion in the stock market.
Here are a few reasons why gold and stocks moving together may be a cause of concern for investors:
Unsteady gold prices
Dollar denominates gold. This means that when the value of the dollar increases, the price of gold decreases. But lately, as the dollar strengthens, the cost of gold has also improved, signaling the current uncertain nature of gold prices.
Similarly, when the stock market performs well, the demand for gold decreases, pushing the yellow metal price downward. But the recent spike in stocks and gold prices are an intriguing mix in the stock market.
Hence, this unsteady performance of gold prices in the stock market is a significant concern for investors as they are confused about the future value of the yellow metal.
Implications for investors
When gold performs well, investors move toward buying more gold as a hedge against the uncertain stock market. Gold is considered a long-term investment due to its ability to gain more than other securities in the remote future.
However, when investors want to make a quicker profit, they turn to stocks as startups and growth companies have proved to yield higher returns in the past.
But due to the movement of both gold and stocks, investors find themselves in a pickle since they can’t seem to be able to predict the next move of the trading.
Why the upward movement of stocks and bonds may not be a bad thing
Analysts are surprisingly optimistic about the current situation. During times of mass uncertainty such as war, gold prices see a drop, but in the course of the current pandemic, the cost of gold has surged.
Researchers believe that this may indicate a more resilient market, and as stocks and gold keep moving together, low yields can push toward a more stable bull market and shoot up asset prices.
If you’re looking to expand your investment portfolio, now is the time to invest in some stunning gold and silver bullion coins. These high yield investments will give you a hedge against inflation.
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