Stocks vs Gold

When we talk about the history, Gold is the oldest currency ever to exist and it’s the only currency which is not backed by the individual Government. Nowadays Gold has become interesting instrument as an investment product. So here, we are going to understand the relationship between stocks vs gold.

Whenever you see the market going down or whenever we see panic selling in the market, gold commonly goes up because people see that gold is fear asset and they immediately start switching their investment from stocks to gold.

Assuming that there is a stock market crash 12 months from now, I can predict in very clear terms that 9 times out of 10, gold moves in the opposite directions of the stock market. When the stock market crashes, gold spikes up, guess what else spikes up? Commodities like crude oil, copper or even coffee – that’s how the market behaves historically. Again, this is 9 times out of 10.

Why those make sense?

So when somebody buys Gold, the price of gold goes up that means the demand for the gold also goes up. People purchase gold instead of purchasing a share because that’s where people see gold as a protection area asset in both physical and in a paper form (For example, buying gold related stocks or ETFs). Gold is an oldest currency which is in a tangible form. It is the instrument where you could store your wealth which is going to retain the value.

Gold is like a fixed commodity which has limited supply, value and price going to change as per demand and supply and that’s why gold is weaker alternative to stocks. It has limited upside and doesn’t move a lot, in other hands stocks which are intangible can increase in value 10, 20, 30 times over real value its worth. Stock gives unlimited update and higher chance for gains. Gold has limited upside, you will see little change in price percentage in month or year. So gold is like a safe asset which gives stable and limited gain. It is used as a reserve currency from which you get access of money.

So this is how one should be comparing Gold and stocks. If you are an investor who deals with gold and stocks then you can switch your investment when market is crashing down.