Gold Is At Extreme Correlations Against Stocks, Bonds And Oil
London (Aug 17) Gold has been exhibiting some extreme correlations over the past three months. And by extreme, we mean the most negatively correlated it has been to stocks, bonds and oil prices in decades (or ever, in some cases). Let's take a look at some charts.
Since 1974, the 65-day rolling correlation between gold prices and US 10-year yields has averaged exactly 0%, i.e., there usually isn't any relationship between the two. However, over the past 65 days, the correlation has moved to more than -60%. The only other time this correlation has been this negative was in October 2001.
Moving to equities, since 1984 the equity-gold correlation has only surpassed -50% a handful of times (1987, 1990, 1993, 2001, 2002, 2003, and 2008). The latest reading of the 65-day correlation is -58% and has only been surpassed once (2003).
The correlation between the VIX and gold is at an extreme as well, but this time on the positive end of the spectrum. The 65-day correlation currently stands at 53%. Frighteningly, since 1990 (when the VIX series begins), the only other times this correlation was so tight was when the US was in the middle of a recession (1991, 2001, 2008).