Traditional Safe Haven Drops Despite Market Volatility
Gold — normally a refuge when markets turn turbulent — has been moving in the wrong direction for investors seeking safety. Instead of rising as stocks weaken, the metal has been falling alongside equities and bitcoin, hinting at deeper stress beneath the surface of financial markets.
On Friday, gold futures dropped 2.4% to $4,094.20 an ounce, their lowest close in a week. This decline came even as the S&P 500 briefly fell as much as 1.3% and bitcoin slipped under $95,000. The simultaneous drop across assets followed a similar pattern on Thursday, when all three closed lower.
“In the short run, gold can move in sympathy with other risk assets as investors look for liquidity,” said Michael Armbruster of Altavest, noting that selling pressure in one area can spill into others when traders need cash.
AI Volatility and Tech Weakness Add Pressure
The S&P 500 continues to struggle through November, dragged down by weakness in technology stocks and renewed worries about the economic outlook. Caution around the AI sector intensified after investor Michael Burry disclosed a bet against Palantir, fueling fears that the recent AI-driven rally may be vulnerable.
If the AI selloff deepens, investors attempting to hedge tech exposure with gold “may be disappointed, at least in the short term,” said Adrian Ash, research director at BullionVault.
Correlation Between Gold and Stocks Turns Positive
Gold has long been prized for one key trait: its lack of correlation with the stock market. Over decades, the metal has shown no consistent tendency to move in the same direction as equities, making it a classic diversification tool.
But recently, that relationship has shifted. The rolling 21-day correlation between gold futures and the S&P 500 is currently 0.22, a modest yet notable positive reading. From October through November, correlations have stayed slightly above zero.
A positive correlation means both assets are moving in the same direction — often a sign that investors are selling winners to cover losses elsewhere. “In a true crisis, all correlations go to 1.0,” Ash said, explaining that traders raising cash can pull multiple assets down together.
This dynamic surfaced during the 2008 financial crisis and early 2020 pandemic panic, when gold initially fell sharply before rebounding sooner and stronger than stocks. Over longer periods, gold’s “insurance” qualities have tended to reassert themselves.
Short-Term Pressure vs. Long-Term Value
Although gold’s behavior this month may unsettle investors who rely on it as a hedge, analysts caution against reading too much into short-term swings. Gold’s correlation with stocks averages near zero over the year, shifting between positive and negative during different market phases.
Ash noted that while recent moves may be frustrating, history shows that maintaining diversified portfolios — including gold — typically pays off over time. The metal’s ability to stabilize portfolios during prolonged stress has been proven across decades.
