What is the correlation between Gold and Nasdaq 100?

The correlation between gold and Nasdaq 100 is complex and multifaceted, influenced by various economic, political, and market factors. Here are some key points to consider:

1. Historical Performance: Backtesting reveals that the average returns of gold and Nasdaq 100 have shown varying degrees of correlation over different periods. Understanding these historical patterns can provide insights into the likelihood of similar performances in the future.
2. Short-Term Correlation: In the short term, the correlation between gold and Nasdaq 100 is negative, indicating that when one rises, the other tends to fall. This negative correlation is consistent with the traditional view that gold is a safe-haven asset, sought during market volatility or downturns, while stocks (represented by Nasdaq 100) are more exposed to market risks.
3. Risk-On/Risk-Off Periods: During risk-on periods, investors tend to favor riskier assets like stocks, leading to a positive correlation between gold and Nasdaq 100 as both rise. Conversely, during risk-off periods, investors shift to safer assets like gold, leading to a negative correlation as stocks fall and gold rises.
4. Simultaneous Peaks: The unusual occurrence of gold and Nasdaq 100 reaching all-time highs simultaneously challenges the traditional inverse relationship. This confluence may reflect specific economic conditions, such as uncertainty or growth prospects, where investors are hedging their bets across both safe-haven and growth assets.
5. Monetary Policy and Interest Rates: Monetary policy, particularly interest rate decisions, can influence both gold and Nasdaq 100. For example, expansionary monetary policies can lead to lower interest rates, which may favor gold as a non-interest-bearing asset. Conversely, contractionary policies may lead to higher interest rates, benefiting stock markets like Nasdaq 100.
6. Economic Indicators: The correlation between gold and Nasdaq 100 can also be influenced by economic indicators such as GDP growth, inflation, and employment data. Positive economic data may boost stock markets like Nasdaq 100, while negative data may drive investors to gold for its hedging properties.

In conclusion, the correlation between gold and Nasdaq 100 is not fixed but rather depends on a dynamic interplay of various economic, political, and market factors. Understanding these factors is crucial for investors looking to manage portfolios that include both gold and stock assets.