October 11th, 2015
When it comes to falling equity markets, most people are unhappy. From investment banks, to prospective college students, to most average investors – an economic downturn in equity markets can be devastating to most portfolios. However, there appears to be one winner during economic down turns: Precious metal markets.
In a world of uncertainty on the Chinese stock market, federal rate hikes, and abysmal energy performance, metals such as gold, platinum, and silver are offering many people a safe haven in which to invest. In the last week alone on speculation surrounding the Fed and a poor jobs report, "gold rose 1.7%, platinum rose 7.9%, and palladium rose 1.5%". The negative correlation between gold and other precious metals has long been noted by many investors. The main reason being that when equity markets get crushed, investors are hoping for a safe haven to put their money: chiefly being gold and other sources of tangible value. Analysts from various banks are describing how the sentiment on metals such as silver and gold have reversed from being the most negative in the last 5 years to bullish levels. What remains to be seen is how long these fears surrounding global stock markets will last and whether gold and other metals will reach highs that are reminiscent of the 2008 era.
-- Sachin Shanbhag Mobile: 732-439-1332 | New York University | Stern School of Business, 2018