Why sudden positive correlation between gold and equity?
Equity and gold are two fantastic asset classes, which do can wonders to your portfolio. Equity on one hand enables to create wealth over the long-term and also hedges inflation, while gold acts like insurance, during economic turmoil and turbulent times of the equity markets – thus having a tendency of becoming bold. In the year 2007 when the global economy was booming, the Indian equity markets (BSE Sensex) too showed an uptrend, and gold typically hovered in the range of 10,000 – 11,000 thus indicating resistance from moving up. It also displayed a negative correlation between the two asset classes – equity and gold. And this negative correlation was also seen during turbulent global economic events such as U.S. Subprime mortgage crisis (in January 2008), Lehman Brothers bankruptcy (in September 2008) and Euro zone debt crisis (in April 2010); where equity showed a downtrend, but gold became bold by showing an uptrend. But nonetheless the Indian equity markets sailed the jitters of
