Gold and Stocks No Longer Are at Odds

One of the supposed great lessons investors learned in the 1990s was that gold is the antithesis of equities, and vice versa. As gold languished last decade amid a prolonged period of disinflation, the dollar rallied and equities soared, fueling such perceptions. By the end of the 1990s, those bullish on gold and related stocks were unassailably bearish on stocks while those upbeat on shares, especially growth stocks, were dismissive of the yellow metal.

Yet a funny thing happened in the past year: While equities have recovered from their three-year bear market, gold has continued its upward thrust, albeit with more volatility vs. the prior two years. The idea that gold and stocks can't rise together doesn't hold anymore.

Factors attributed to gold's continued rise include the dollar's weakness -- spurred by the Federal Reserve's highly accommodative policies and the Bush administration's deficit-inducing tax cuts, as well as investors' desire to own so-called alternative assets following the three-year bear market and an uncertain geopolitical climate. ...