Does Gold Go Up When Stocks Go Down?

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Financial author Camille Gaines, AFC, answers the question: does gold go up when stocks go down?
One of the best ways to offset stock market risk is by owning investments that go up when stocks go down.
But what goes up when stocks go down?
We’ve all heard that gold is an investment that goes up when stocks go down making it the best way to hedge against stock market crashes. But Has this always worked? you’ll see in this video.
This channel is all about helping people 1. build wealth with Slightly alternative methods that don’t take decades and 2. creating diversified income streams so you can live well. I am not a financial advisor so I'm not trying to sell you wealth management services or act as one.

I remembered that gold did not go up when stocks went down in 2008, at least not in a clear cut fashion. My memory was that in 2008 gold was volatile as investors feared the demand for gold would be down on a global basis so I did some digging for an article I wrote at RetireCertain.com. In hindsight, it was more complex as you’re about to see.
So, Did Gold Go Up When Stocks Crashed in 2008?
Here is how gold performed in 2008 according to data at USAgold.com.
Gold prices on January 1, 2008 833.50
Gold prices on December 31, 2008. 880.15
So there was an Increase in price of gold 2008 46.65
On a percentage basis, gold went up 5.6percent in 2008 while the SandP 500 dropped 38.49percent that year. This means that gold was an effective hedge against the stock market decline in the year 2008.
But, Again, insightful gold investors did not have a smooth ride in 2008 and here’s why. During 2008, gold went as high as $1,003.20 on March 17, 2008 and as low as $722.70 on October 22, 2008!
Nevertheless, gold was an asset that did go up when stocks went down for the calendar year of 2008 based on where it began and ended the year.
But if gold is such a great hedge, Why Didn’t Gold Go Straight Up When Stocks Crashed?
For one thing, the price of gold is strongly affected by the US dollar which adds another layer of complexity.
Perhaps even more important, gold is a “source of funding for margin calls made on declining assets” as explained in a Seeking Alpha post by Plan B Economics. This leads gold to experience forced selling at times.
Much of the reason why gold was so volatile when stocks fell in 2008 was due to the borrowing and selling of gold on the market so banks could meet the required liquidity requirements during the financial crisis.
H3 Gold Vs Stocks in History
How has gold done in other bear markets? It’s actually gone down during some of them.
In fact gold went down when stocks went down in both the 1980 bear market and the 1998 stock market correction. This shows that gold is not always negatively correlated to stocks.

So how has gold done overall in past bear markets?
Gold price movement was negatively correlated in 6 of the 8 stock market declines of 19 percent or more since 1976.
This means gold went up when stocks went down in 6 of the 8 stock bear markets since 1976.
If you want to know more about what goes up when stocks go down, watch this video next.
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I really appreciate you watching. Thank you:)

Prosper and Thrive,

Camille Gaines AFC
#RetireCertain