Not quite.
The shiny metal offers no such inverse correlation to equities -- the metal’s co-movement to the Dow and Nasdaq was less than 0.03 in the past decade.
Its allure is down to very fact there’s little relation between the two, because portfolio managers can lower the amount of risk they’re exposed to per expected unit of return through buying unrelated assets.
True to form, a regression plotting movements in the S&P 500 against that of gold looks like it was fired from a shotgun.
Myth 3: The physical market never matters
Another supposition: consumers of physical metal, such as jewelry and coin buyers, wield little power. After all, gold is a tradable asset overwhelmingly gripped by the ebbs and flows of global finance.
But while physical buyers aren’t key in fueling rallies, real-economy demand has historically proved a faithful floor when prices have fallen.
Gold’s woes this year, therefore, may come as little surprise given the diminished appetite of a key marginal buyer: India. The world’s second-biggest investor has held back, driving global demand down to its lowest in almost a decade in the first half of the year.
Myth 4: ETFs don’t move the needle
Gold exchange-traded funds can have an outsize influence on the broader market -- much more than commonly assumed.