What Does The Great Disconnect Imply for Gold?

Gold last traded at $1,736 an ounce. Silver at $17.67 an ounce.

NEWS SUMMARY: Precious metal prices rose Tuesday on safe-haven buying despite a firmer dollar. U.S. stocks rose in volatile trading as investors cheered upbeat retail sales in May.

 YAHOO FINANCE---. They have been rising since the end of March despite the collapsing economies and soaring unemployment. Why? And what does it imply for the gold prices?....China - and Western countries as well - can forget about the V-shaped recovery...Instead, we could see a U-shaped recovery, which is deeper and more prolonged, or even a L-shaped recovery, which is even slower...Or, there might be actually a mix of V, U, and L: in some industries the recovery will be quicker, while in certain industries - think airlines - it will be slower. Another possibility is that the recovery will look like W, i.e., there will be a rebound in one or two quarters, followed by another dip because of the second wave of epidemic. The W-shaped recovery seems to be the most positive scenario for the gold market, as the second wave of injections would imply renewed worries and shaky economy....However, the performance of the global equity markets suggests that investors are rather optimistic about the future, at least this is the popular interpretation...We know that the stock market is not the real economy and that stock markets are forward-looking and do not want to fight the Fed, but the disconnect is troubling. After all, Mr. Market is not always correct - for example, it overlooked the risk of Covid-19 pandemic....The rebound in the S&P 500 was driven by selected few companies, i.e., Microsoft, Apple, Amazon, Alphabet, and Facebook - the relative winners during the Great Lockdown that forced people to shift into the online world. Moreover, the behavior of cyclical commodities and bond yields suggest rather weak recovery. What does it mean? Well, the fundamental outlook does not bode well for equity markets....investing in the stock market seems to be risky right now given that the V-shaped recovery is unlikely and given elevated equity valuations, so adding gold, which is good portfolio's diversifier, to the portfolio might be a smart move."