As Russ discusses, negative real interest rates help explain why gold is moving more in tandem with stocks these days.

In a year characterized by unprecedented market moves, it’s understandable that subtler developments have gone mostly unnoticed. One such development, key for building portfolios, is how asset classes are moving relative to each other. In that vein, a shift worth noting: Gold is now increasingly trading with, rather than against stocks. This suggests that in the current environment gold is less of a hedge and more a play on real-interest rates remaining negative.

I last wrote about gold three months ago. At the time, I suggested that a combination of a weak dollar and negative real (or inflation-adjusted) rates would support prices. While the metal is off significantly from its summer high, gold has almost kept pace with stocks, gaining 5.9% during the past three months (see Chart 1). This performance has been far better than other hedges, notably U.S. Treasuries.

Chart 1
Q3 Asset Performance

Asset performance

Sources: Refinitiv DataStream, chart by BlackRock Investment Institute as of September 30, 2020
Notes: The bars show performance in local currency terms except for currencies, gold, and copper, which are spot returns. Government bonds are 10-year benchmark issues.
Past performance Is no guarantee of future results. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.