You might be wrong at the moment if you fully believed in the traditional relationship prevailing between different investment asset classes, especially as we live with a pandemic that continues to manipulate markets, and the US elections are The fiercest in history and refuses to close its veil without fears, insults, and the movement of financial markets, whose waves do not calm down
From this standpoint, we note that the inverse relationship between gold prices and stock markets has not been in the usual optimal way in the recent period. It is natural for metal prices to fall when stock markets are running. Good is on the rise, and vice versa when the stock market collapses, the demand for gold is supposed to increase as investors search for safe-haven options.
But the yellow metal struck this traditional relationship on the wall on several occasions, the last of which was last Thursday's session, where gold prices witnessed a jump in excess of $ 50, which pushed them to levels of $ 1950 an ounce with the presence of The state of uncertainty in the American political street, and the strange thing is that at the same time the markets witnessed strong rallies in global stocks, especially on Wall Street, during the same session, as the Dow Jones rose by more than 540 points, consolidating its gains towards its best weekly performance since April.
On the contrary, what happened in the week before last when global stocks recorded their worst weekly performance since March, affected by the second wave of the epidemic and the return of the closure in European countries, and in the same Time, gold prices witnessed weekly losses of about 1.3%, as the metal traded below $ 1900, losing more than $ 100 from the record level recorded last August.
In the same week, the session on Wednesday (October 28) witnessed the failure of gold to remain as a safe haven with a large selling wave in global stocks, during which it lost $ 32 an ounce. Despite losses of more than 900 points for the Dow Jones index of US stocks.
So why does gold rise with the gains in stocks and retreat despite their losses sometimes? This question is becoming more and more important as we live in the American elections, the announcement of the victory of Joe Biden and the rejection of his opponent, Donald Trump, the result, the accusation of fraud and the application for asylum in the Supreme Court, and any change in it may have an impact on all asset classes
And for the first part of the question , financial stimulus is the keyword, because regardless of who wins the US election, it will support congressional approval. For a stimulus package to support the economy exhausted by the repercussions of the pandemic.
Gold is rising with more fiscal or monetary stimulus because it is considered a hedge against the acceleration of inflation and currency devaluation, which the stimulus may cause, and it is the great danger that both parties ignore in their battle. Moreover, stocks receive support from financial incentives as they support companies and the economy.
