Gold has long been seen as the ultimate risk-off asset — it climbs when markets tumble. But for the past two years, it has not acted that way. Gold has risen along with equities or lagged while under stress. Its recent rush toward $4,000 an ounce smacks of speculative excess even as it may still be blinking a systemic warning. For traders, it is a cycle like no other: the surge in gold comes as typical safe-haven assets have lagged behind amid widespread risk-on sentiment across global markets.
Gold’s Traditional Role in Crisis
Gold has nearly always done well when investors have sought refuge from financial anxiety. Gold rose roughly 25% during the 2008 Global Financial Crisis compared with a 37% decline in the S&P 500. It climbed anew during the European debt crisis in 2011 (+28 percent) and the COVID-19 pandemic in 2020 (+24 percent), when monetary stimulus and fear lifted prices above $2,000 an ounce. The relationship of gold to equities with these situations has usually become inversely correlated, at times as deeply as –0.25 to –0.40. In effect, it provides an excellent diversification tool for a portfolio.
Gold’s gains are closely tied with real interest rates. Gold shines when real yields drop and weakens when they rise. Studies put that inverse correlation around –0.8. In times of deflation or plain low rates, this has been the relationship that makes gold a practically perfect complement to Treasuries.
When the Signal Broke: 2023–2025
The past two years have strained that relationship. Equities collapsed in 2022 but gold did not rally. After soaring during the invasion of Ukraine, it then fell nearly 8% as the Federal Reserve raised rates aggressively and the U.S. dollar surged. Real yields turned positive, eroding the argument for holding a non-yielding asset. Simultaneously, Treasuries lost their safe-haven status — stocks and bonds fell together for the first time in decades, as their correlation turned positive (+0.44).
Increased yields and a stronger dollar and inflation weighed on gold’s risk-off behavior. Investors who hoped gold would act as a hedge against losses in equities watched it instead track macro tightening, not fear.
Gold’s correlation to risk had become unreliable by 2023. It did jump in the March 2023 regional-bank scare, but it also rallied in risk-on periods, tracking stocks through 2023 and into 2024. This dynamic, according to research conducted by the University of Stirling, has been dubbed the “fading safe-haven effect”, as gold has come to operate more like a financial asset driven by speculative flows. The growth of ETFs and futures trading has made gold more correlated with liquidity cycles; when investors are in a risk-on mood, they now buy gold along with other assets rather than instead of them.
Structural Shifts Supporting Gold
Gold’s strategic bid is still in place below shorter-term correlations. Central banks have been snapping up record quantities too — more than 1,100 tons in 2022, the biggest haul in 55 years — led by China, Russia and Turkey. These are not day-trading momentum plays; these are purchases of dollar risk and geopolitical fragmentation hedges. That official stockpiling serves as a rock-solid base to prices and suggests that while traders may play with it tactically, policymakers perceive it for what it is: monetary insurance.
For its part, perennial inflation and fiscal deficits have also left some investors purchasing gold less as a haven during crises than as protection from currency debasement. This goes some way to explaining why both gold and equities are rallying in unison: they’re each being seen as a “real asset” in an environment where bonds no longer offer purchasing-power stability.
A Bubble—or a Warning?
Gold’s run since late 2023 has been remarkable. It sits up about 80% from early 2024 levels, recently rocketing back to near $3,950 an ounce and approaching the once-unthinkable threshold of $4,000. Gold-mining shares have doubled year-to-date. The pattern — steep gains, a media frenzy and retail participation — is mania like.
Gold and equities, in fact, have both jumped to records in 2025, an unparalleled parallel move.
Drivers of this surge include:
Inflation and debt anxiety. Traders are scared of currency debasement from persistent deficits and real rates that remain negative against inflation.
Geopolitical tension. Prospective trade wars and ongoing conflicts have increased gold’s risk premium.
Declining confidence in Treasuries. Increased long-term yields from fiscal pressure have diminished bonds’ role as a safe haven.
Momentum trading. Hedge funds have climbed on board, driving gold toward symbolic levels like $4,000 and producing a speculative feedback loop.
Even some gold bulls are calling the move “bubble-like.” But bubbles can arise exactly when investors feel systemic vulnerability. The rise of gold appears less relentless, and perhaps less bubble-like, if interpreted as the result not just of exuberance but also of a growing wariness about paper assets among much of humanity.
Reading Gold’s Message
Traders may not deride the rally but see it as a warning sign. Gold may be front-running a transition from market euphoria to stress. The macro backdrop supports that reading. Central-bank accumulation also entails preparing for financial instability. Gold typically tops out around the start of crises; if chaos emerges later in 2025, its strength will seem prescient.
Gold’s correlation with real yields has occasionally gone positive in recent quarters, meaning it has risen as rates have moved up. High geopolitical risk and a new record of official demand are two factors why this anomaly exists. Such behavior suggests investors are now buying gold not because yields are falling, but because they mistrust what high yields signal — fiscal stress and prolonged inflation.
A Rotation Back to Treasuries Coming?
The tussle between gold and Treasuries as havens is likely to shape the next stage. In the near term, gold retains momentum; traders not convinced of the credibility of bonds continue to make it their hedge of choice. If inflation pressure wanes and the Fed switches to a persistent rate-cut cycle, Treasuries, however, are likely to regain that leadership. Steeper yield curves would provide room for gold to climb further, but a real disinflationary slowdown is historically bullish for bonds.
Gold tends to rise when real yields decline, but the relationship weakened after 2022.
A realistic possibility: if 2025 concludes in a Fed easing cycle, and the odds of recession keep growing, then Treasuries can rally hard as they take risk-off flows head on. Gold could fall back toward $3,000 and still be structurally supported by central-bank buying and lingering geopolitical risk.
The Bigger Picture: Diversifying, Not Predicting
For traders, the lesson is humility: markets change, correlations change, even safe havens can act counterintuitively when the drivers of risk change. In a world driven by debt-fueled growth and policy uncertainty, gold’s churning price action could be not so much an anomaly as it is symptomatic of deeper turbulence.
Whether this is a bubble or a barometer will become known in hindsight. Gold’s ascent will be viewed as prescience if equity and credit markets falter. If disinflation wins the day, the metal could retrace — but it can still serve as a useful shield. But until Treasuries can re-establish themselves as the premium hedge, gold will remain the trader’s proxy for systemic fear.
Bottom Line
Gold has been defying the old playbook since 2022, but it is still sending a message. Its near-lockstep rise with stocks means that fear and speculation are now joined at the hip.
Until something breaks.
The Lead-Lag Report is provided by Lead-Lag Publishing, LLC. All opinions and views mentioned in this report constitute our judgments as of the date of writing and are subject to change at any time. Information within this material is not intended to be used as a primary basis for investment decisions and should also not be construed as advice meeting the particular investment needs of any individual investor. Trading signals produced by the Lead-Lag Report are independent of other services provided by Lead-Lag Publishing, LLC or its affiliates, and positioning of accounts under their management may differ. Please remember that investing involves risk, including loss of principal, and past performance may not be indicative of future results. Lead-Lag Publishing, LLC, its members, officers, directors and employees expressly disclaim all liability in respect to actions taken based on any or all of the information on this writing.