Gold, Stocks & the Pandemic: a Powerful Contracyclical Play in Action

The comments below are an edited and abridged synopsis of an article by Daniel R. Amerman

While the use of gold to protect against inflation is well known, it has other investment attributes that are potentially even more valuable, and this is particularly true in times of crisis.

Gold Stocks & Pandemic | BullionBuzz
COVID-19 Coronavirus financial crash chart crisis with mask and Currency Dollar Euro and Gold

Amerman examines the relative performance of gold and stocks (as represented by the S&P500) between early February and late May, as Covid-19 and the resulting economic shutdowns transformed global economies and markets.

The short-term relationship is an almost perfect match with what 50 years of financial history shows us is perhaps gold’s most valuable investment attribute over the long term, which is its contracyclical relationship with stock prices.

Up for discussion: creating the gap; contracyclical rewards and penalties; seeing the long-term power; and opposition and alignment.

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