One of the frustrating components for alternative-minded investors is the blue-chip stock market -- no matter what happens, no matter how bad the fundamentals or economic metrics, equities seemingly are impervious. Much like the presumptive Republican presidential candidate, Donald Trump, the Dow Jones or the S&P 500 just keeps on churning -- bearish data be damned! That's incredibly maddening for many folks, who would prefer a series of mild corrections rather than an explosive deflationary event ala 2008.
At the same time, the gold markets are a source of exasperation -- but to those on the opposite side of the trade. After dropping 6% of value in May -- and past what many technical analysts claimed were critical support lines -- the spot-price of gold bullion made a sizable jump, up nearly 3%. True, gold is still on shaky ground, since its current positions traps it between prior support now acting as resistance, and a long-term horizontal trend line acting as support. Still, it's a lot better than the clearly negative trajectory it was facing.
It also affirms that no matter how many times "gold haters" try to drop bullion valuations through technical means, a counteracting force has propped it up. That force is the underlying fundamentals. Gold -- and silver, platinum, and palladium -- had a strong day largely on the back of a very poor jobs report. While most forecasts -- particularly those from big American banks -- were calling for mid-six digit figures, the actual result was a lowly 38,000 jobs created in May.
You don't need to be a mathematician to understand that that is well below the standard deviation for what was expected. It also sent a shockwave to those closely following the markets and the economy. One thing now is very clear. One of the markets -- either gold or the stock market -- is woefully out of touch with reality. At some point, there will be a correction. But which asset will it be?
Many people are taught that gold and silver investments are exotic vehicles, and that they should be reserved for "expert" traders. On the other hand, mutual funds that track the performance of the broader stock market can be trusted -- after all, "buy and hold" is what renowned investor Warren Buffett endorses. If he's recommending something, you should follow -- or some derivative of that message.
But what investment has actually made money? Over the trailing one-year period, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is down 0.41%. In contrast, the SPDR Gold Trust (NYSEARCA:GLD) is up 4.2%. Although the straight numbers aren't necessarily remarkable, the difference between the two couldn't be more obvious. One fund is in the red, the other is in the black.
Say what you want about market dynamics, the real question is this: if the economy is doing so well, as is claimed by the Obama administration, how come the wealthiest of individuals are reluctant to invest in America? If anything, the wealthy are moving their money into gold.
That would temporarily be good for gold investors, but the broader implications are ominous for all.