By Myra P. Saefong
The correlation between gold futures and U.S. stocks has never been more negative.
But despite the inverse relationship, gold and equities may soon be poised to rise together as both can benefit from low yields, analysts said.
Sean Williams, a writer for Motley Fool, pointed out in a blog post Tuesday that the correlation between gold futures and the stock market last week hit its most negative level ever at minus 0.63, based on data from FactSet going back to 1984. Historically, the two assets have an average negative correlation of minus 0.06, he said.
A positive reading of 1.0 would mean the assets move in perfect lockstep in the same direction, while a read of minus 1.0 would mean the assets move in a perfectly inverse relationship. A reading of zero would mean the assets move with perfect indifference to each other.
“The opposition in movements between gold and the stock market has never been stronger,” Williams wrote.
Gavekal Capital also pointed out the extreme negative correlation in a blog last week. Since 1984, the negative equity-gold correlation has been stronger than minus 0.5 only a handful of times, according to an Aug. 16 blog written by Eric Bush, portfolio manager, North America at Gavekal Capital.