Is Gold a Safe Haven During a Stock Market Crash?

Gold is widely perceived as the best safe haven for your capital as the stock market goes through a bear market correction or a full market crash.

But is this really true?

For gold to be a good hedge it would need to move in the opposite direction (have a negative correlation) to the broad market index, in this case, the S&P500.  For you to protect your 401K you would want to see evidence of gold being the right bet.

Looking back 15 years we can see this is not the case for Gold (GLD) versus the market.

Gold vs the S&P500, 15 Year Monthly Chart Comparison
Gold vs the S&P500, 15 Year Monthly Chart Comparison

2005 to 2007

Gold out-performs the S&P500 with 52% gains compared to 25% for the S&P500.

2007 to 2009

During the Financial Crisis, Gold provided a good safe haven for 7 months until it lost all of its gains.  This meant that those moving their capital to gold at the beginning of the crash would have made no profits.  But if you had invested in gold in 2008 you would have incurred severe losses.  This does not sound like a safe have to me.

2009 to 2020

The S&P 500 goes on a staggering bull run making 481% to January 2020

Gold makes 138% from 2009 to 2012 moving in correlation with the market, then suffers a serious crash wiping out 42% of its value.  The crash and stagnation last 8 years.

Gold is still 13% lower than its previous all-time high.

So during an 11-year bull run in the stock market, Gold actually lost 13% of its value.

My Observations

  1. Gold might provide a very temporary solution as a safe haven during the early part of a stock market correction.
  2. During the Credit Crisis, Gold should have been a perfect store of value because as it seemed the Fiat Currency system was failing gold would have been a great replacement currency along with silver. But that did not work out.
  3. Gold is only a safe haven is people think it is.
  4. Since the 2009 market bottom, Gold has increased by 65% and the SP500 232%

Would I use Gold as a safe haven?

Personally no.

Not based on this evidence.

But in the short-term, it may provide relief until people stop believing.

What is a good alternative? Holding cash and dollar-cost averaging into the market again as we near the bottom.


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