This chart compares the historical percentage performance of the Dow Jones Industrial Average with the performance of gold prices over the past 100 years. In general, the correlation between gold and stocks is inversely proportional. Which means that when the price of gold rises, prices in the stock market will fall. Unlike the S%26P 500 price index and the Dow Jones, the Wilshire Large Cap Index is a total return index, in which all resulting cash payments (including dividends) are automatically reinvested into the fund itself.
The so-called printing of money has been one of the factors that gold bulls point out when they defend new runs for the metal. Detrick says tandem gains for gold and stocks are quite rare, but they could portend a new rise in both assets, rather than necessarily suggesting an ominous outcome for the rise in equities. The stock market — the Dow Jones industrial average — is behaving in relation to the price of gold bars. However, the chart above, which presents the price of gold and the Dow Jones, also shows periods of joint movement (think back to the 2000s).
The LPL strategist said that when this condition of rising gold and stocks occurred more than four decades ago, both assets enjoyed double-digit returns. It is unclear how long gold and stocks can maintain their current trends, particularly during a period in the market where the coronavirus crisis has tarnished economic prospects and fueled unusual asset movements. Clearly, as the chart below shows, there have been many periods when stocks and gold have moved in opposite directions. That said, data shows that gold has tended to continue to rise when it starts trading in record territory, while stock price rallies eventually fade.
However, silver is much more widely used in industry; therefore, it behaves more like a commodity and is more sensitive to the business cycle than gold. We encourage you to learn more about the precious metals market, not only what is the link between Dow Jones and gold, but also how to successfully use gold as an investment and how to trade it profitably. Nowadays, investors can buy gold bars in a variety of ways, including the old-fashioned one, as gold bars, or as tradable instruments, such as mutual funds, futures contracts and exchange-traded funds, such as SPDR gold stocks. Therefore, although there is sometimes a change of funds from equities to the gold market in times of stock market crashes, the link between Dow Jones and gold is complex and depends on external macroeconomic factors.
The index was created by Charles Dow in 1896, making it one of the oldest stock indices in the world.