BRENT MIGHT CROSS 100 NEXT WEEK HOW FED MIGHT REACT TO OIL PRICE SHOCK THE WEEK AHEAD ECONOMIC DATA RELEASE 1ST MAR 2026 IGNORE DATA FOR TIME BEING, LOOK AT NEWS FLOW IRAN WAR MIGHT GET A LOT WORSE BEFORE IT GETS BETTER US NFP FEB’26 PREVIEW THE WEEK AHEAD ECONOMIC DATA RELEASE 22ND FEB 2026 RISK ASSETS MIGHT BE WRONG ABOUT IRAN
Macrospectrum
Subscribe icon
Commodities

Gold now risks a correction after equities rebound

ADMIN || 21st October 2025

Despite its hedging allure, gold’s negative correlation with stocks has pretty much vanished on a short-term, 60-day basis.

While it has ebbed and flowed in recent years, this is a reminder that gold may not serve as a perfect diversifier the next time fear takes over. Since early 2024, there have been seven instances when the S&P 500 dropped more than two standard deviations in a day and gold fell as well. After this year’s outsized gains, the metal could be vulnerable to forced selling if liquidity tightens and traders scramble to raise cash for margin calls or redemptions. We’ve seen that play out earlier this year and it could happen again.

Retail investors bought the dip in gold on Friday last week via ETFs, but the correction likely has more to run as the metal remains exceedingly overbought relative to underlying fundamentals.

Retail traders are not ready to write off gold after Friday’s 1.7% selloff, which extended to 3.4% intraday, with the largest gold ETF, the GLD, showing large net inflows on the day.

We believe Gold’s rise at its current rate is not sustainable. It remains very overvalued relative to where a fair value model based on where gold’s principal drivers of real yields, the dollar, stocks and copper says it should trade.

It’s unlikely therefore the correction is over. Nonetheless, the primary bull trend is likely to remain intact until a large seller comes.

Legal Disclaimer:

Trading foreign exchange/commodities/equities/bonds on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange/commodities/equities you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange/commodities/equities trading and seek advice from an independent financial advisor if you have any doubts.

Read More