• Home
  • Courses
    • NSE Academy Certified Courses
      • Capital Market Analytics
      • Certified Program on Intraday Trading Strategies
      • Advanced Technical Analysis
      • Advanced Options
      • Advanced Algo Trading
      • Advanced Fundamental Analysis
      • Advanced Risk Management
      • Algorithmic Trading & Computational Finance using Python & R
    • TC Courses
      • FSM 1.0
      • FSM 2.0
      • Mentorship Program
  • Learning Center
    • Financial Education
    • IPO Issues
    • Fundamental Analysis
    • Technical Corner
    • Options Corner
    • Risk Management
  • Screener
  • Emerging Leaders
  • Terminal
  • Subscribe
Have any question?
7718989954
info@tradingcampus.in
Login
Trading CampusTrading Campus
  • Home
  • Courses
    • NSE Academy Certified Courses
      • Capital Market Analytics
      • Certified Program on Intraday Trading Strategies
      • Advanced Technical Analysis
      • Advanced Options
      • Advanced Algo Trading
      • Advanced Fundamental Analysis
      • Advanced Risk Management
      • Algorithmic Trading & Computational Finance using Python & R
    • TC Courses
      • FSM 1.0
      • FSM 2.0
      • Mentorship Program
  • Learning Center
    • Financial Education
    • IPO Issues
    • Fundamental Analysis
    • Technical Corner
    • Options Corner
    • Risk Management
  • Screener
  • Emerging Leaders
  • Terminal
  • Subscribe

Risk Management

  • Home
  • Blog
  • Risk Management
  • Is gold a safer instrument to invest? – Gold V/s S&P500

Is gold a safer instrument to invest? – Gold V/s S&P500

  • Posted by Trading Campus
  • Date March 25, 2017
  • Comments 96 comments

Historically, it has been observed that whenever stock markets have crashed, there has been a rise in the prices of gold. It seems quite fabbling that how only gold’s prices rise when there is a fall in the value of currency , there is inflation in the market .

Below is a table of biggest falls in S&P 500 and the corresponding changes in prices of gold.

    S&P 500 decline dates                  S&P 500 (%)                  Gold (%)
Sep 21, 1976 to march 6,1978                 −19.4                      53.8
Nov 28,1980 to august 12,1982                −27.1                   −46
Aug 25 ,1987 to dec 4,1987                −33.5                      6.2
July 16,1990 to oct 11,1990                −19.9                      6.8
March 27,2000 to oct 9,2002                −49                     12.4
Oct 9,2007 to march 9,2009                −56.8                     25.5
May 10,2011 to oct 3,2011                −19                     9.4

 

As we can see above whenever there was a recession, the values of gold increased. It was only once in the year 1980 when the gold prices fell much more than the fall in S & P index. This might be an interesting scenario for investors of gold to sell their gold during the recession period to realize utmost profit. Accordingly they can time their investments. Historically it has also been seen that even when the S & P index remains constant for a long period of time , gold prices have increased extraordinarily (In 2016 there was a 2300% increase in gold prices in the period when the S & P 500 remained constant)

When there is a crash in the economy , recession sets in i.e the supply of money in the economy decreases. For efficient functioning of economy, the government needs to increase money supply in the market. Thereby, Government does an open market transaction in which Government purchases Gold from the market and thereby supply currency. This increases the supply of currency in the market and hence, currency value decreases. Also, since Government has purchased Gold from the market, the demand of gold increases and Gold price increases.

As stock market crashes, more and more people find gold a better investment opportunity and they start selling stock and buy more gold. Thereby, though stock market falls, Gold price rises. This is because Gold is considered as safe investment by people. Thereby, it is not a thing to wonder why they have negative correlation. Gold’s purchasing power generally does not fall, at the max it remains constant and is always a safe haven for investors to park their money in .

The reason that makes the price of the gold go up aside from the demand and supply of the gold is due to the the general psychological perception of people towards its worth. During the stock market crashes which generally leads to deflation thereby affecting the money supply in the economy  makes gold a really good investment .When in recession times, people start losing trust in the economy, in government securities and bonds,it is when the gold becomes the most attractive investment because of its constant/good purchasing power .

When recession sets in, monetary authorities are expected to supply the market with enough liquidity. If people see that monetary changes in  the economy are likely to reduce the purchasing power of currency, the purchasing power of the gold is most definitely likely to go up.

  • Share:
author avatar
Trading Campus
We provide courses in Share Market Training certified by NSE Academy. Get Adequate knowledge through our classroom courses.

Previous post

Introduction to Option Greeks
March 25, 2017

Next post

How to do Financial Planning?
March 27, 2017

You may also like

Arithmetic Operators
12 May, 2021

There are around 7 arithmetic operators available in python. These are called as binary operators because they act on two operators. a = 13, b = 5 Operator Meaning Example …

Operators in Python
11 May, 2021

An operator is a symbol that performs an operation. Some examples of operations are addition, subtraction, multiplication etc. a + b is an operation where a,b are operands and ‘+’ …

Bear Call Spread
23 December, 2020

Bear call spread is an option strategy used by traders to cap their maximum loss. At first, a trader is bearish with the downside capped, so he initiates a sell …

    96 Comments

emerging leader

  • Basics of Python
  • Emerging Leaders
  • Financial Education
  • Fundamental Analysis
  • Investment Ideas
  • IPO Issues
  • Nifty 50
  • Options Corner
  • Risk Management
  • Technical Corner
  • Uncategorized

Past Batches

December 2018 – Completed

March 2019 – Completed

July 2019 – Completed

November 2019 – Completed

January  2020 – Running

Get Updates

Subscribe to our mailing list and get learning stuff and updates to your email inbox
Loading

Accordions

Company Summary

Bajaj Electricals Limited is engaged in engineering and projects; power distribution, illumination and consumer durables businesses.

It has a range of domestic and kitchen appliances comprising water heaters, room heaters, coolers, irons, mixers, induction cookers, toasters, kettles, microwave, rice cookers, gas stoves, non-electrical kitchen aids and pressure cookers.

It offers ceiling, table, pedestal, wall, fresh air and industrial fans, and lighting solutions, such as light sources, light emitting diode-based lighting products, domestic luminaires, torches and lanterns.

Key Highlights of Company Business

Segments and Products

The Company's business segments consist of

  1. Lighting;
  2. Consumer Durables;
  3. Engineering & Projects,

The Lighting segment includes lamps, tubes and luminaries.

The Consumer Durables segment includes appliances and fans.

The Engineering & Projects segment includes transmission line towers, telecommunications towers, highmast, poles and special projects.

The Others segment includes diecasting and wind energy.

Financial Performance

Financial Ratios

Trading Campus

7718989954

info@tradingcampus.in

Company

  • About Us
  • Gallery
  • Team
  • Contact Us
  • Careers

Courses

  • Technical Analysis
  • Algo Trading
  • Options
  • Fundamental Analysis
  • Risk Management
  • Algo Trading using Python

Support

  • Learning Center
  • Forum
  • Login
  • Videos

Education WordPress Theme by ThimPress. Powered by WordPress.

Copyright © 2018 Trading Campus. All rights reserved.