Traditionally, gold prices rise when equities fall, and vice versa, making it a good place to park assets when the stock market is in turmoil. These days, gold just seems to fall regardless of what stocks are doing, as they fluctuate wildly in the wake of Federal Reserve Chairman Ben Bernanke’s attempts to talk about the end of the Fed’s efforts to stimulate the economy.
The Standard & Poor’s 500-stock index dropped as much as 5 percent in the days after Bernanke’s June 19 press conference, and gold might have benefited from investors seeking to ride out the storm—that’s what has happened during selloffs in the past. Instead, gold fell too. This may have to do partly with the general consensus that stock prices aren’t overinflated, as they were during the dot-com bubble of the late 1990s, when shares’ price-earnings ratio went as high as 30. Today, the multiple is about half that.
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