Market Overview

Dear Goldman Sachs: What Happens To Gold In A Falling Market? During Interest Rate Hikes?

Dear Goldman Sachs: What Happens To Gold In A Falling Market? During Interest Rate Hikes?

Goldman Sachs clients have been flooding the bank with questions about how gold performs under two conditions: a falling stock market and rising interest rates. The questions seemingly stem from growing market concern over the impact of future Federal Reserve rate hikes, particularly if the hikes trigger a pullback in the stock market.

The potential for a September rate hike was likely the catalyst behind last Friday’s 2.4 percent selloff in the S&P 500. Now Goldman clients seem to be looking for a safe haven.

History shows that they may have found one in gold. Gold has typically outperformed during extended periods of stock market declines and during interest rate hike cycles.

Related Link: Biggest Threat To The U.S. Economy? The Presidential Election

Despite a 25 percent jump in gold prices this year, gold has lagged the S&P 500 during the last several years of its bull market. Since the beginning of 2010, gold is up just 18.6 percent compared to an 88.8 percent gain for the S&P 500.

However, if you look back 10 years to before the Financial Crisis, gold has more than doubled the return of the S&P 500, gaining 127.7 percent.

At the very least, investors seem to be interested in a way to hedge against falling stock prices.

Since March, 2007, the SPDR S&P 500 ETF Trust (NYSE: SPY) and the SPDR Gold Trust (ETF) (NYSE: GLD) have virtually zero daily price correlation

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Posted-In: Gold gold bullion metalsEducation Commodities Top Stories Markets General Best of Benzinga


Related Articles (GLD + SPY)

View Comments and Join the Discussion!
Lightning Fast
Market News Service
$199 Free 14 Day Trial
Book A Demo
Learn How You Can Succeed In The Market With Benzinga Pro

Fastest Market News

Real-Time News Alerts

Customizable News Filters

Book A Demo

U.S. Dollar Index Lower Ahead of Data

USDA Daily Cattle Slaughter; Live Cattle Futures Higher