Wednesday, 1 April 2020

Correlation between gold prices and equity indices

Gold continues to be the safe haven during times of distress. No wonder India is among the highest importers of gold in the world along with China.

 In the charts below, correlation between monthly changes in gold prices and equity indices has been shown for three time periods - since inception of the index, 10-years and 5-years.

 In the last 5-years gold has shown low to moderate degree of negative correlation with every other equity index on BSE. Gold prices have shown a correlation of 0.00, -0.07,-0.15 with Sensex since inception, 10-year and 5-year periods respectively.

In a globalized financial market, gold is the among the very few asset classes that offers a very low or moderately negative correlation with equities.

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