Correlations Often Gravitate to 1-to-1 in Down Markets The 60-day correlation between gold and the S&P 500 at about 0.70 on July 17 -- the highest in our database since 1975 -- may highlight a primary risk for the metal in 2H. Is it merely a coincidence, or signaling something? My bias is to heed the warning. Correlations approaching 1-to-1 typically occur in down markets. Using a base of 100 in 2006, the graphic highlights the same-chart syndrome of gold and the S&P 500 from 2018-24, and how stretched the metal was at its 1Q peak near $5,600 an ounce. Reversion is gold's current trajectory, with about $3,000 marking a relative-value gravity level. What of the highly correlated and volatile metal if stocks drop? Gold's 260-day volatility at 2.2x that of the S&P 500 -- the widest premium since 2007 -- suggests stock-market volatility is too low, gold's is too high, or both. Full report on the Bloomberg here: https://blinks.bloomberg.com/news/stories/ti3vt9kgctgc {BI COMD} #gold #stockmarket @Bloomberg(Mike McGlone)