Gold Correlation with Stocks Turns Negative

Further gains in global stock markets this year will be a signpost of more losses for gold, according to analysts, citing a re-established negative correlation between the two assets.

After nearly a decade of bullion broadly tracking stocks, as represented by the S&P 500 index, this year the opposite relationship materialised as share prices rallied.

While the S&P index has gained 10 percent so far on the year to date, gold is sitting firmly in bear market territory. After a brutal sell-off in April, it is nursing an annual loss of around 24 percent.

The S&P and spot gold showed a positive correlation between 0.6 and 0.9 from 2004 to 2012, after being negatively related between 1990 and 2003, according to data from Standard Bank Research.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza