Here’s a quick and dirty comparison of stocks vs. gold this morning. Actually it’s the SPY ETF and the GLD ETF, and it doesn’t even capture the funnest action of the day, which took place around 3 AM, when gold was getting killed along with US futures. But the point is that gold and equities are moving very similarly right now, going up and down at roughly the exact same time.
The market is thus debating two very different, but awful scenarios
The first is the catastrophic scenario, where someone (maybe Greece, maybe a big bank?) goes bust, and the system goes kablamo, killing stocks, and causing mondo liquidation in gold, as everyone scrambles for cash.
The second scenario is the no growth, zero-rates environment where there’s nothing good to invest in. That might be OK stocks (at these levels) and it’s great for gold, which has thrived in this environment.
An actual return to growth, normal inflation, stability, etc. might see stocks rise and gold fall, but at the moment we’re not seeing that kind of divergence.
Conversely, there was a point when bad news was good for gold (because it implied more Fed easing), but at this point, the news is so bad that bad news increases the odds of disorderly liquidation.
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