Gold Stopped Being A Hedge In 2009

The chart below shows how something has clearly changed with gold prices lately. It moves right with stocks (The S&P 500, ‘SPY’), thus doesn’t look like much of a market hedge.

ETFdb: The correlation between SPY and GLD has been nearly 0.95, compared to nearly zero historically. As shown in the chart below, GLD and SPY have moved in lock step through the first six weeks of 2010:

Chart

Moreover, gold started to correlate with stocks sometime during 2009:

Chart

If this correlation continues, one has to wonder what exactly gold is achieving within a portfolio these days. Probably not what it was intended to do. Note how it was falling on global market and economic concerns lately.

(Charts via ETFdb)

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.