Apple is down 2%. The big gold ETF, GLD, is down 1.4%.
These moves are happening on a day when the market is basically flat. It’s not an accident that they’re diving together.
The reason is: During the immediate post-crisis era, gold and Apple were huge outperformers, that were uncorrelated to the day to day “risk on, risk off” regime that was dominating financial markets.
Remember, investors are desperate to find uncorrelated assets that don’t just mimic the S&P. Thus gold and Apple both held tremendous value as assets that provided outperformance, and seemed to exist in a world of their own rules, and their own returns. Apple seemed disconnected form the hum-drum economy. Gold, it was argued, represented an alternative to the repressive financial system that punished fools for believing in paper money.
But now things are changing. Suddenly the market and the economy are looking better. This means that Apple no longer seems so special. Lots of companies have the ability to thrive. And with the economic improvement, the appeal of gold is limited too.
So Apple and gold move together.
Here’s a look at Apple and GLD just over the last 3 months. It’s not perfect, but it’s striking that both tanked and recovered within just a couple of days of each other.
And now here’s a look at GLD and Apple going back 2 years!
Both rallied throughout 2011. Both had a peak in early 2012. Then both had a final, ultimate peak in late 2012. Then both fell since then, and both fell out of bed in early April. Then both spiked back in the second half of April. Then both started fading again in recent days.
The similarities in the charts are uncanny.
Both Apple and Gold represented alternative assets that bought immunity from the overall market.
The same story that’s killing one is killing the other.