Why Gold Is the Market's Biggest Loser Today

A week after markets plunged on bullish predictions from Federal Reserve Chairman Ben Bernanke, stocks are cruising higher on positive economic news. The market's day-to-day movements can be a little head scratching at times. It has become abundantly clear that the market's sour reaction to potential reductions in Fed bond-buying was overdone last week, and economic data released this week has eased investors' fears.

Today's economic releases showed a 9,000-person drop in unemployment claims to 346,000 -- very close to the four-week moving average of 345,750 and another sign that the labor market is improving, albeit very slowly. Consumers are also spending enough to keep the economy running: The Department of Commerce revised its April consumer-spending figure from a 0.2% decline to a 0.3%.  

The Fed has also been working to slow down the rise of long-term interest rates, which would have the most detrimental impact on the economy. The 10-year Treasury yield has fallen from 2.55% in early trading to 2.49% -- an indication that the Fed's efforts to pull back on taper talk are working. 

Add all of this up, and investors are once again bullish on stocks and unconcerned about a rapid rise in interest rates, pushing the Dow Jones Industrial Average (DJINDICES: ^DJI  ) 0.86% higher and the S&P 500 (SNPINDEX: ^GSPC  ) 0.68% higher near the end of trading.

But not every sector is having a good day. Gold has dropped again, and SPDR Gold Shares (NYSEMKT: GLD  ) has fallen 1.7%. The ETF is down 33% from its 52-week high, due in large part to the realization that inflation will not take hold in the U.S. and the Fed's money-printing days are nearly over.

Gold bugs have been bidding up the shiny metal on the thesis that the Fed's easy-money policies will both expand the money supply and lead to inflation, leaving gold as the only safe haven. It turns out that inflation hasn't been a problem, and as the Fed starts to stop the printing presses, there's less and less credence in that bullish argument. Thus the price of gold is rapidly declining -- and I don't see it stopping anytime soon.

Gold isn't a great investment now, but if you're looking for some long-term investing ideas, you're invited to check out The Motley Fool's brand-new special report, "The 3 Dow Stocks Dividend Investors Need." It's absolutely free, so simply click here now and get your copy today.

Read/Post Comments (1) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 27, 2013, at 4:19 PM, Hoptopia wrote:

    In other news the Federal govt is now debt free and in no danger of shutting down. How much longer can all these false prophets keep our teetering house of cards standing?

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2513751, ~/Articles/ArticleHandler.aspx, 9/29/2016 11:41:35 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,277.72 -61.52 -0.34%
S&P 500 2,166.37 -5.00 -0.23%
NASD 5,290.01 -28.54 -0.54%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/29/2016 11:26 AM
^DJI $18282.03 Down -57.21 -0.31%
^GSPC $2166.45 Down -4.92 -0.23%
S&P 500 INDEX CAPS Rating: No stars
GLD $125.71 Down -0.51 -0.40%
SPDR Gold Trust CAPS Rating: **