Sighting: Gold & Stocks – A Complicated Correlation

The equity market sell-off in the past few weeks has been shocking.... But what may also surprise you is the recent weakness in gold. Shouldn’t the safe-haven asset shine most in turbulent times?.... George Milling-Stanley, chief gold strategist for the SPDR ETF business, tells [] what’s happening in the gold market and what ETF investors can expect going forward. In this type of’d expect people to flock to safe havens like gold. But gold, too, is under pressure. What gives?

Milling-Stanley: ...[A] lot of investors had bought equities on margin.... [R]ather than selling their equities in order to meet the calls for additional margin, they sell something that has held its value, which at that point is gold. They use the proceeds from sales of gold to meet the cash margin calls on their equities.... Had gold not been a strong asset — it rallied significantly in 2019 — would it still be the No. 1-choice asset to be liquidated when investors need to come up with cash?

Milling-Stanley: That last summer we broke out of the top of a trading range that had been in force for six straight years is very important. Gold is a much more valuable asset the higher its price, allowing people the ability to sell less gold to meet those cash margin calls. Another thing worth saying is the fact that gold is a very deep and liquid market.... Asset flows show that redemptions have been happening primarily in the biggest, most liquid gold ETF, GLD. It’s not in competing funds such as the SPDR Gold MiniShares Trust (GLDM)...or the iShares Gold Trust (IAU). Does that speak to trading liquidity?

Milling-Stanley: Exactly. GLD is by far the most liquid gold ETF out there. There’s no question it’s still the 800-pound gorilla. The total amount of gold backing physical gold ETFs around the world currently stands at around $140 billion to $150 billion. GLD alone is more than one-third of that.... Aside from cash flow needs, should we expect gold ETFs to attract more assets from here?

Milling-Stanley: Unless there is renewed pressure from the equity markets — which might postpone a recovery in gold prices and postpone inflows into the ETFs — we’re going to see gold prices recover, and money move back into GLD in more force than they had been, if history’s any guide.

– From a 3/17/2020 post at, a site covering exchange-traded funds. Read more at