Should you still hold gold as correlations rise?

Natalie Kenway
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Investment managers are beginning to question the value of holding gold for diversification purposes, as its correlation to equity markets soared to 65% this year.

Historically, the precious metal has been the asset class of choice to protect portfolios against downturns in equity and bond markets, and to hedge against inflation. While this worked in investors' favour throughout downturns in the past, more recently, gold is moving more in line with other markets. According to Morningstar data, the long-term correlation of the SPDR Gold ETF to the S&P 500 has historically been 0.11%, and this fell to 0.02% during the credit crunch. During the bull run of 2009 to 2011 it moved into negative territory and was -0.13%. However, since 2011 it has i...

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