Gold and S&P 500: Inverse Correlation or Myth?

Many traders assume gold always moves opposite to stocks, especially the S&P 500. The idea feels simple: when equities fall, gold should shine. But market history shows a more complicated picture.

• Over the long run, the correlation between gold and the S&P 500 is close to zero, not strongly negative.
• They often move in opposite directions during stress, but not always.
• In some periods, both rise together. Liquidity waves and rate cuts can lift gold and stocks at the same time.
• For traders and investors, gold works best as a conditional diversifier, not a guaranteed hedge.

Gold and S&P 500 Correlation Explained

Correlation measures how two assets move in relation to each other. A positive number means they tend to move in the same direction. A negative number means they often move in opposite directions. When the number is close to zero, there is little to no relationship.

For gold and the S&P 500, the long-term correlation is close to zero. This means there is no stable rule that one rises when the other falls. At times, gold has moved higher while stocks sold off. In other periods, both have climbed together.

The reason is simple: correlation changes with market conditions. It can turn negative in crisis periods when investors look for safety in gold. It can also flip positive when low interest rates or strong liquidity support both assets.

The Myth of Constant Inverse Moves

It is common to hear that gold always rises when stocks fall. This is more of a market saying than a fact. Over decades, data shows gold and the S&P 500 have not held a steady negative link. 

The inverse pattern appears mainly in stress periods. During crises, investors often sell stocks and turn to gold as a safe place. That can push gold higher while equities drop. But outside of those moments, the relationship is far less reliable.

This is why traders should avoid assuming that gold will automatically move opposite to stocks. The “always inverse” idea is a myth.

When the Relationship Flips Negative

The link between gold and the S&P 500 is not fixed. Most of the time, the correlation hovers close to zero. But in certain market conditions, it turns negative very sharply. These are usually moments when fear dominates and investors search for safety.

Crisis and Risk-Off Periods

Gold often shows its hedge role when markets are under stress. In times of crisis, investors cut exposure to stocks and move toward safer assets. This flow can push the S&P 500 down while lifting gold prices. 

Take the global financial crisis in 2008 and the pandemic shock in 2020 as examples. In both periods, gold gained while equities sold off.

Case Snapshots

• 2008–2009: Gold became a preferred hedge while U.S. stocks collapsed during the financial crisis.
• 2013: During the Fed’s taper talk, both assets moved with sharp volatility, and gold briefly gained as stocks weakened.
• 2020: In the early weeks of the pandemic, gold spiked while equities plunged, before both recovered on massive liquidity support.
• 2024: Gold and the S&P 500 rose together, showing that correlation is not fixed. Lower yields and liquidity supported both assets at the same time.
• 2025: Gold has surged about 40% year-to-date through September, marking one of its strongest yearly performances in decades. In contrast, the S&P 500 has gained roughly 13% over the same period. Instead of acting as a pure hedge, gold has behaved more like a macro-driven growth asset, moving in closer tandem with equities as both benefited from lower yields, strong liquidity, and central bank demand.

Data Insights & What to Watch

• According to LongTermTrends, the gold-S&P correlation is volatile and often oscillates between negative and positive regimes.
• Some market commentary in 2025 observes that gold has developed a stronger correlation with equities than usual.
• In SSGA’s midyear outlook, they state gold ran ~25 % in early 2025, indicating strong demand, but do not claim a clear inverse correlation.
• The World Gold Council continues to note that gold decouples (becomes more inverse) during stress, but couples with equities during risk-on phases.

What Drives Gold vs. Stocks

Several forces shape how gold and the S&P 500 move in relation to each other. These drivers often matter more than the correlation number itself.

• Real Yields: Gold has no yield, so it competes with real interest rates. When real yields fall, gold tends to gain, sometimes even alongside equities.
• U.S. Dollar: A weaker dollar supports gold. Stocks can also benefit if a softer dollar boosts multinational earnings.
• Liquidity Cycles: In periods of heavy central bank support, both gold and equities can rally together. Liquidity often blurs the safe-haven role of gold.
• Earnings Risk: Equities depend on profit growth. If earnings outlooks weaken, stocks suffer. In those times, gold can stand out as an alternative store of value.

Traders should track these factors closely rather than rely on a fixed “inverse” rule.

Portfolio Takeaways for Traders and Investors

Gold’s role depends on the time horizon. For traders, it can shift quickly between a hedge and a risk asset. For investors with longer horizons, the focus is on diversification. The key is to see gold as a flexible tool, not a fixed opposite to stocks.

For Short-Term Traders

• Use gold as a hedge mainly during stress or high-volatility events.
• Track real yields, the dollar, and Fed signals; they often set the tone for both assets.
• Don’t assume gold will always rise when stocks fall. Check market conditions first.
• Combine gold trades with risk management rather than treating them as an automatic offset.

For Medium- to Long-Term Investors

• Gold offers diversification because its long-term correlation with equities is low.
• Even a small allocation can reduce overall portfolio swings.
• Do not rely on gold as a perfect hedge. It protects mainly in certain crisis windows.
• Think of gold as a complement to equities, not their opposite.

S&P 500 vs Gold: ROI Comparisons

Over the long run, gold and the S&P 500 show very different patterns of return. The tables below compare performance across 25-, 10-, and 5-year windows. You can see how gold often shines in longer cycles, while equities deliver steadier compounding.

FAQs

Is gold a reliable hedge every time stocks fall?

No. Gold often acts as a hedge in crisis periods, but the link is not constant. Outside of stressful events, correlation may be weak or even positive.

Why did gold and stocks rise together in 2024 and 2025?

Both assets benefited from lower yields, central bank liquidity, and expectations of easier policy. In those conditions, gold behaves less like a safe haven and more like a growth-sensitive asset.

Are gold and the S&P 500 inversely correlated?

Not really. The long-term average correlation is close to zero, meaning there is no permanent negative link.

What should traders watch when trading gold against stocks?

Focus on real yields, the U.S. dollar, and central bank guidance. These drivers explain more than the correlation number itself.

Does volatility in the VIX affect gold–stock correlation?
Yes. When the VIX spikes, risk aversion rises. In those periods, gold often strengthens while equities weaken, increasing the chance of a negative link.

Can sector performance in the S&P 500 change its relationship with gold?
It can. For example, strong tech rallies may break the inverse pattern if liquidity supports both growth stocks and gold.

How do intraday correlations behave in volatile markets?
They can swing sharply within hours. Traders often see gold and equity futures move together at market opens, then diverge once macro headlines or data releases hit.

Is the gold–S&P correlation stable across currencies?
No. Correlation can look different if you measure S&P returns in euros or yen. Currency effects can distort the gold–equity link.

Can leveraged positions amplify perceived correlation?
Yes. Futures and options flows can exaggerate moves. For instance, heavy hedging with gold futures can create short bursts of stronger inverse correlation against equity futures.

Do central bank gold purchases alter correlation with equities?
They can. Large-scale buying from central banks adds demand that is unrelated to equity markets. This structural flow may weaken the inverse relationship that traders expect.