The General Trend Shows a Similar Movement Between Gold and S&P500, Except a Few Times
The general understanding toward stock markets and safe heaven assets is that when stock markets underperform, safe heaven assets usually outperform. It may not be entirely true. From a simple point of view, S&P500 has increased from 1400 to more than 2000 over the 16-year span. The gold price has also appreciated from just 277 dollars per ounce to over 1300 dollars over the same period. We may conclude that they move together as they do have a positive correlation, but the longer term analysis can tell us that the reason behind it is the real GDP growth and the strengthening purchasing power of consumers, and businesses also grow through continuous innovation. From the graph, we can see that trend lines how us that they do appreciate together, but there are two very distinct point: one at 2008, and one at 2012. At 2008, the financial crisis led to a collapse of the stock market and SP500 dropped significantly, and gold has move inversely and created a new high. From 2011 to 2013, a couple years most investors deem as the best years for stocks over a decade, SP500 skyrocketed with the gold dropped significantly from its previous high after the financial crisis. The underlying reason for such movements is the risk-aversion apatite investors generally share at a time of crisis and uncertainties, and the risk-on apatite when things are better than previously anticipated. A good example of such effect is when a...
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...floating and appreciating in relation to Dollar, gold price has also started increasing at a faster pace. The trend is very obvious that as US dollar becomes cheaper to Yuan, the Gold price increases at an even higher percentage. I cannot definitely say that such correlation is entirely caused by the exchange rate, but some causation is in there undoubtedly.
Underlying Effect of Gold Price
A lot of times, the data would affect the mind set of investors. More precisely, it is the information, or the message, behind the data that actually influence a single investment or the entire market. For example, many people believe that if a company’s earning drops or become negative, its share price would drop as well. However, a lot of times, even when a company’s earning becomes negative but has beaten the analysts’ forecast, its share price would increase because it shows a
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