Gold Price In Limbo As Stocks Tumble

Stocks made their march to 20,000 last week—at least as far as the Dow Jones Industrial Average is concerned—but as many psychological barriers in investing end up, the milestone appears to have had no teeth. Early trading this Wednesday morning is mixed while gold is struggling to remain above $1,200.

So what happened? Was the 20,000-point milestone really something worth celebrating, or is it possible that the stock market—and the gold prices, with them—are much more lukewarm than people care to admit?

No Reason To Watch Stocks As An Inverse Of Gold

If there’s anything we’ve learned with this 20,000-point milestone, it’s that 20,000-point milestones don’t mean as much as investors like to believe. That’s especially true when you consider the price of gold, which has done just fine in recent weeks, staying above $1,200, which is still higher than where it began in early 2016.

That’s why major stock milestones should not be an indicator to investors that you should stop buying gold—or vice versa. DailyFX points to other elements at play in the price of gold, particularly the U.S. dollar index and treasury bond yields. If anything else, the 20,000-point milestone has proven to be of little consequence to anyone except to say that investor confidence is higher than it otherwise could be. And most experts don’t need a nice, round number like 20,000 to tell them that.

Uncertainty In Policy: Good For Gold?

There’s no doubt that people who work in currencies understand how important the Trump administration’s positions on global trade and currency manipulation can be. We saw that recently when gold received a boost on Tuesday: the Trump administration was taking a position against currency manipulation, which seemed to ramp up fears of trade wars and currency wars.

One way to “opt out” of a currency war of that type is simply to buy up precious metals, so it’s not surprising that increased fears about these kinds of positions could push people toward gold. But unless there is a major move in the gold price, these short bumps in the price of gold might mean little.

If Stocks Stay Put, Does That Mean More Investors Moving To Gold?

Stocks have hovered underneath the 20,000-point barrier for some time, now even going above it before coming back down to earth. Should people really expect continued growth, or is there a chance that investors looking for better returns in 2017 should turn to precious metals?

If anything, there appears to be a holding pattern at the moment. Unless there is a major crisis or a policy-changing event like we saw last year with Brexit, investors probably won’t expect a big move in the price of gold or US equities for some time. Even so, the degree to which people seemed to push up the gold price in the wake of comments by the Trump administration shows just how tenuous some of these prices are at the moment. For many, uncertainty tends to point to hedge investments like gold.