Skip to Content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

Free Trading Guides
Subscribe
Please try again
Select

Live Webinar Events

0

Economic Calendar Events

0

Notify me about

Live Webinar Events
Economic Calendar Events

H

High

M

Medium

L

Low
More View More
Top Trading Lessons: Ignore ’Market Lore’ and Focus on the Evidence

Top Trading Lessons: Ignore ’Market Lore’ and Focus on the Evidence

Top Trading Opportunities in this Quarter
Top Trading Opportunities in this Quarter
Recommended by Ilya Spivak
Get Your Free Top Trading Opportunities Forecast
Get My Guide

Seemingly one of the most stubbornly durable bits of “market lore” is that traders treat gold as some sort of ultimate safe haven. Tellingly, the financial news media is often filled with hand-wringing when this relationship breaks down, as it sometimes invariably does.

2020 offered a potent case in point. As the Fed successfully pushed back against Covid-inspired market turmoil, gold began a spirited march upward alongside stock prices. A chorus of exasperated traders and journalists seemed convinced that this was some sort of short-lived aberration, yet the move continued for the better part five months.

In fact, the logic driving market action seemed quite sensible. The Fed’s fireworks pushed inflation expectations up while nominal interest rates sank, sending real rates of return into negative territory. Stocks offering dividend yields with a sliver of positive real income and gold – which offers no yield but protects against negative returns on cash – understandably rose in tandem.

Top Trading Lessons
Top Trading Lessons
Recommended by Ilya Spivak
Top Trading Lessons
Get My Guide

Trying to fight this on the premise that “gold is a haven” would have likely been disastrous. Only when the Fed signalled in August that it might be done expanding the stimulus toolkit and would be adopting a hands-off stance did gold establish a top and turn lower. A simple look at the chart might have enlightened many, yet the “gold is a haven” tale persists. The takeaway here is that traders are probably best served not to take such things at face value.

S&P 500, spot gold, the TED Spread and the US Dollar

SPX vs gold, ted spread, us dollar

Chart prepared by Ilya Spivak, created with TradingView

--- Written by Ilya Spivak, Head Strategist, APAC at DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivak on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES