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Gold and Bitcoin down; Is the S&P 500 next?

Gold and Bitcoin down; Is the S&P 500 next
Elmaz Sabovic

Amid the period that has seen Bitcoin (BTC) and gold experience losses in value, investors might wonder whether the stock market will face the same fate or whether the S&P 500 will manage to weather the storm.

With the negative correlation between the value of gold and the stock market, the outlook looks promising.

Often, throughout history, when the price of gold goes down, the stock market experiences gains, and vice versa, as seen in the post on X from Ali Martinez on December 12.

Price chart of gold, Bitcoin, and the S&P 500 index.  Source: Ali Martinez
Price chart of gold, Bitcoin, and the S&P 500 index. Source: Ali Martinez

In contrast to the prevailing optimism, JPMorgan’s chief global equity strategist forecasted a substantial downturn, projecting the S&P 500 to drop to 4,200 by the end of 2024. Citing economic indicators such as slowing global growth, dwindling household savings, and persistent geopolitical risks, the strategist presented a forecast that diverges from the prevailing bullish narrative, raising eyebrows among observers.

Investors are currently treading cautiously, eyeing key economic events such as the release of November inflation data and the Federal Open Market Committee (FOMC) meeting scheduled for December 12. 

While no immediate interest rate adjustments are expected, market attention is centered on the Federal Reserve’s projections for the upcoming year, with speculation about potential rate cuts by the end of 2024.

Bitcoin, gold, and other commodities experience losses

Among the notable market shifts, Bitcoin decreased by over 5% on December 11. BTC’s decline has also influenced the broader cryptocurrency market, with Ethereum (ETH), Cardano (ADA), and Polygon (MATIC) experiencing losses as well. During this session, the cryptocurrency market lost $80 billion, bringing the overall market cap to $1.5 trillion.

Commodities are demonstrating vulnerability, with gold and oil experiencing a 1.3% and 0.6% decline, respectively. Natural gas witnessed a significant drop of almost 7%, attributed to forecasts of milder-than-expected weather and a greater-than-anticipated decrease in demand through the month’s end.

S&P 500 witnessing gains

Despite most tech giants, known as “Magnificent 7,” experiencing losses in their stock value, the S&P index shows modest gains, with an increase of 0.39% since the previous market close on December 11, bringing the value to $4,622.

However, other sectors across the industries picked up their slack, such as financials, utilities, real estate, and others, experiencing small gains, not more than 1% in their value.

Supported by a robust economy, easing inflation, and the possibility of interest rates reaching their peak, investors have overcome concerns about a potential recession and reentered the stock market. 

The main question is whether the current robust market rally can extend into 2024 or if an economic slowdown and subsequent stock market crash are on the horizon.

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