The gold and stock prices are actually characterized by a negative correlation. This means that the gold price usually benefits from falling share prices and decreases when the stock exchanges increase. This is due to the fact that investors view gold as a “safe haven” in times of crisis. Here they park their money when the stock markets give way. Conversely, they switch their money into equity investments when the mood in the markets is good.
Gold and stocks in step
But this order was overridden in the Corona crisis: Gold and shares suddenly move in the same direction. At the beginning of the crisis, gold, despite its reputation as a “safe haven”, also suffered price losses – just like the stock exchanges. For yellow precious metals, however, this was not the result of waning investor confidence, as was the case with stocks, but the losses were due to emergency sales by investors, who were asked by their banks to provide additional liquidity for their securities-backed loans.
The panic subsided
In the meantime, the panic has subsided, and many investors are hoping for a rapid economic recovery. Thanks to this optimism, the US leading index Dow Jones has increased by almost 9 percent in the last three months. It is noteworthy, however, that the gold price also rose over the same period, by around 4 percent. At the beginning of July, he also climbed above the $ 1,800 mark for the first time since 2011.