Stock And Gold Correlation

Historically, the correlation between the stock market and gold prices is low, or even negative during some periods. Because of this, gold is often seen as a good asset for a diversified portfolio since a low or negative correlation can increase diversification. However, just because it happened in the past does not mean that it will happen in the future. For example, while the market dropped on Monday, gold prices also took a hit. While one day does not a trend make, both the stock market as a whole and gold are down year-to-date. All of this should be taken as a warning. Just because two assets have had a low or negative correlation in the past does not mean that the correlation will hold going forward. In other words, when using correlation, we want the correlation going forward but are often forced to use historical correlation.