When President Trump unleashed a trade war shortly into his second term, the stock market plunged, with the Standard & Poor’s 500 Index dropping 17 percent between February and early April of 2025. Gold, meanwhile, gained more than 6-1/2 percent.
Gold responded similarly to stock market declines in 2018, 2011, 2010, 2009, 2008, and 2007. As stocks sank, investors rushed to the safe haven of gold.
This is a key reason gold is such a valuable component of well-diversified investment portfolios: it has a low correlation to the stock market and therefore can significantly reduce the risk that investors assume with equities, particularly when shares appear overvalued.
Over the 30 years ending March 31, 2026, gold had only a 0.05 correlation with the S&P 500, and just a 0.13 correlation with global stocks, as measured by the MSCI World Index. Gold also had a low correlation with bonds, just 0.03 to U.S. Treasury Bills during the same time frame.
“From a portfolio perspective, a primary utility for gold is as an effective and robust risk-management tool, a durable mechanism to preserve wealth, and an efficient source of portfolio diversification,” concludes State Street Investment Management.
Gold’s broad-based global demand in both strong and weak economic environments helps explain its low correlation to other investment asset classes, as well as its ability to mitigate extreme risks that can severely damage investment performance. As a result, gold reduces portfolio volatility and improves risk-adjusted performance.
State Street evaluated the performance of stock and bond portfolios with varying amounts of gold. A portfolio with 10 percent in gold delivered a 6.6 percent annual return from the beginning of 2005 through the end of the first quarter of 2026. By comparison, a portfolio without gold had an annualized returned of just 5.9 percent through the two decade period. These findings strengthen the case for including gold in all investment portfolios to both increase portfolio stability and elevate performance.
