Gold's moves in 'lockstep' with U.S. stocks could point to a brewing market danger

By Myra P. Saefong

Gold, a risk-off asset, has spent time moving lower alongside risk-on assets this week

Gold prices often have no day-to-day correlation with U.S. stocks - but that hasn't been the case lately.

Investors often turn to gold if they need a safer place to park their money when other assets weaken - but that hasn't necessarily been the case this month.

Lately, gold has been falling alongside U.S. stocks, which suggests a more dire situation for markets could be afoot - especially if it means there is no safe haven for investors to turn to.

Prices for gold (GC00) ended 2.4% lower on Friday to settle at $4,094.20 an ounce, their lowest level in a week, even as the S&P 500 index SPX briefly fell by as much as 1.3% from Thursday's close and bitcoin (BTCUSD) touched lows under $95,000.

That came after gold, the S&P 500 and bitcoin all closed lower on Thursday.

Read: Bitcoin's bear-market rout deepens as prices hit a 6-month low. Why long-term holders stepping up selling could be a bad sign.

"In the short run, gold can move in sympathy with other risk assets as investors look for liquidity," said Michael Armbruster, co-founder and managing partner at futures brokerage Altavest.

During Friday's session, the S&P 500 briefly turned higher before ending modestly lower, while bitcoin and gold prices declined for the session. The stock market index's moves Friday followed a sharp decline Thursday, which left it on pace for a November loss. The S&P 500 index has been dragged down by its technology sector and questions about the health of the broader economy.

Read: This chart shows why the bull market deserves the benefit of the doubt as tech stocks try to rebound

With concerns around an artificial-intelligence bubble gaining even more attention after legendary investor Michael Burry's bet against Palantir Technologies Inc. (PLTR), "there's a risk that investors expecting to hedge tech-stock risk with gold will be disappointed if the AI selloff continues, at least in the short term," said Adrian Ash, director of research at BullionVault.

Why correlation matters

Gold - which is often seen as a safe-haven asset, and which usually benefits from risk-off sentiment in markets - "famously shows no correlation with stocks over the long run," Ash told MarketWatch by email.

A positive correlation, however, means that the two assets have moved in the same direction. That can mean that investors suffering from losses in the stock market are scrambling to make up for them by taking advantage of their gains in gold.

On Friday, the rolling 21-day correlation between the most active gold futures and the S&P 500 was slightly positive, at 0.22, according to a Dow Jones Market Data analysis of FactSet data.

For the most part, the correlation reading has been modestly positive in October and November so far.

This year, gold's rolling one-month correlation with the S&P 500 has swung around from positive to negative, but has averaged close to zero across the year, noted Ash.

While a reading of 1.0 means they've moved together in lockstep, a minus-1.0 reading means they've moved opposite to each other, he explained. A zero average, meanwhile, means that across the period, gold shows "absolutely no day-to-day relationship with the stock market."

In a 'true crisis,' all correlations go to 1.0 - meaning gold and the S&P 500 move in lockstep - because 'traders losing money on one set of assets will need to raise cash from their winning bets.'Adrian Ash, BullionVault

An average reading this year of nearly zero correlation "masks the fact that sometimes the relationship is strongly positive and sometimes it's strongly negative," said Ash.

In a "true crisis," however, all correlations go to 1.0 because "traders losing money on one set of assets will need to raise cash from their winning bets," he added.

That's why gold sank during the worst phase of the 2008 market crash and also plunged during the initial stages of 2020's COVID panic, Ash said. Gold's longer-term value as financial insurance then paid off because the safe-haven metal "found its floor sooner and rallied harder than stocks, extending its long-term uptrend and reducing overall portfolio losses."

"While nothing is guaranteed, it typically pays to look beyond the short-term noise and stay diversified," Ash noted.

-Myra P. Saefong

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

11-15-25 0800ET