Gold has been the standout winner following the US election. The metal’s performance yesterday was particularly impressive in that it coincided with notable losses in stock markets. The Wall Street Journal comments that year-to-date, gold has outperformed the S&P 500 (the former up 10.6%; the latter just 10%).

This is not a huge difference, and critics of gold will be sure to note that it doesn’t pay a dividend. But as Franco-Nevada Chairman Pierre Lassonde once commented: “bullion doesn’t pay interest or dividends, nor does it grow or expand by itself. That’s the price you pay for tranquillity.” Physical gold (and other precious metals) are no one else’s liability, in contrast with stocks, bonds, and currencies; given the shakiness of the financial system at the moment and the systemic risk affecting financial assets, this value is not to be sniffed at.

In addition, US market dividends are currently well below the historical average, and given the chatter about the fiscal cliff that is picking up steam in the media, stocks could be in for a tough period as we head into the new year. In an interview he gave on RT’s Capital Account yesterday, James Turk also brought to attention the interesting fact that despite the Federal Reserve announcing a new round of asset purchases two months ago, its balance sheet has remained flat since – meaning that they haven’t been pumping new money into the financial system. This makes it hard for stocks to move higher.

In contrast, gold thrives at times when Washington’s fiscal problems take centre stage of media attention, as we saw during the summer 2011 debt-ceiling wrangling. Combine this with the pickup in Indian buying as we head into Diwali, and short-term trends look increasingly bullish for the metal. If it can get its nose above $1,800 and hold it there, we’ll know we’re likely at the start of a serious leg-up in this market.