Gold’s unusual lockstep with stocks rally may last till US presidential polls

In an unusual trend, gold and stock markets in India are moving higher in tandem contrary to past patterns when usually one is favoured over another by investors.

So what is driving this coupling at a time the world is grappling with once-in-a-century pandemic?

While gold has risen to near record highs because of its traditional appeal as a store of value, the bounce back in stocks comes amid eased lockdowns, Oxford University’s promising covid vaccine and hopes of more government stimulus.

But that is only on the surface.

“There is too much money chasing too few assets,” says Krishna Nathani, managing director of, explaining that the government stimulus measures have freed up too much money at a time when assets like real estate and many businesses are struggling with demand.

To be sure, the stocks boom has been led by a handful of companies such as those in the technology world.

Now the market is bracing for more easy money with the European Union agreeing to a 750 billion euro stimulus package and the US preparing to rollout a 1 trillion dollar stimulus.

The situation is looking eerily similar to the Eurozone crisis of 2011 when a number of member nations faced a balance of payments problem, triggering a European financial bailout program that drove up gold to a record high of $1,924/oz in September of that year, Gnanasekhar Thiagarajan, director of Commtrendz Risk Management, told

Anti-inflation hedge

Fears of more money driving up inflation have burnished up gold’s appeal as an anti-inflation hedge, he added.

Weakness in US dollar amid US-China tensions have also helped gold, said Anuj Gupta, vice president research at Angel Broking.

Interestingly, hopes of a demand recovery for both the industry and gold are riding on the rural sector, which again is unusual as most companies usually bank upon urban demand.

The majority of gold demand in India, however, which along with China ranks as a top consumer, depends upon rural demand.

With good monsoon rains, traders believe that physical gold consumption is set to rise in coming weeks especially with the start of the festival season from August, possibly driving prices higher.

Punters are also shifting their bets away from agricultural commodities towards gold and other metals as higher farm supplies will likely weigh on prices of crops, traders say.

Traders don’t see much of a decoupling happening between gold and stocks for at least a couple of months.

But the upcoming US presidential elections may again see a divergence, depending upon whether Trump is ousted from his leadership position, which may again create uncertainty and possibly benefit gold.

Biman Mukherji is a columnist and consulting editor at He has worked for international news organisations such as Reuters, The Wall Street Journal as well as for newspapers like The Times of India. He can be reached at

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