Many don’t remember in 2008 the 30% drop in the price of gold SPDR Gold Trust ETF (GLD) that coincided with the drop in the stock market represented by the Dow Jones Industrial Average (DJIA) which lost 34% the same year. They do remember gold bottoming in November 2008 and taking off to its all-time high in 2011 putting square blame on the financial bubble that had just popped and an uncertain future. It took until March of 2009 for the DJIA to bottom at 6,594.44 before climbing to over 18,000 by 2015.
This rise in the stock market received some fuel from the beginning in December 2008 3 months before the DJIA low with the first round of quantitative easing (QE1) and the beginning of the “wealth effect” which then Fed Chairman Ben Bernanke alluded to in 2010 when he said the following;
Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.
We then got QE2, QE3 and a stock market that moved higher until March 2, 2015 when the DJIA hit a closing high 18,288.63. Gold peaked in 2011 after QE 2 and before QE 3. The stock market was taking over again as the asset to own and with the dollar rise, gold became an afterthought…..
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About Doug EberhardtDoug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
Disclosure:
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
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