By Patti Domm

Gold and stocks have been rallying together to record highs, as the dollar sags and bond yields go sideways.

This consensus trade has worked well this year, as investors buy gold over other havens and load up on stocks. Foreigners are hedging holdings against the dollar, pushing it lower. The potential for more Federal Reserve rate cuts is also driving the dollar down. Gold is an attractive alternative, even as it trades above $4,000 per troy ounce for the first time.

The tight correlation between the gold market and stock market leadership is unusual. Bank of America points out that in the third quarter, small-caps and the tech and communications services sectors were the best stock market performers. Those sectors outperformed along with gold, the best performing asset class, up 16.4% in that quarter.

Those particular sectors have not really had much correlation with gold at all, going back to 1989, BofA said.

Gold and stocks can be correlated in risk-on periods, but if the market mood swings, it is gold that has the staying power.

"Historically, when there is a selloff in equities, you can see a positive move in gold and vice versa," said Chris Louney, commodities strategist at RBC Capital Markets. But there are other times -- like now -- when they both rise together. "Investors, on the one hand, are afraid of missing out and they are investing in the risk-on [stock] market. And at the same time they recognize the uncertainty and they are making investments in gold."

Guggenheim Investments Chief Investment Officer Anne Walsh said the correlation is working because there are important drivers for both gold and the stock market. They aren't just moving on froth, though equity valuations are high.

"As long as it is a bull market rally, and not a speculative rally, then I think there is room to run," said Walsh.

The stock market may be bubbly, but it isn't in a bubble, Walsh says. The tech leadership has been powered by earnings, unlike in the late 1990s.

Worries about government debt, geopolitical risks and Fed independence have helped drive gold up 54% this year. There is also less interest in dollar assets globally. Central banks have been big buyers of gold, acquiring 1,000 tons annually in each of the last three years. RBC expects central banks to buy 850 tons this year.

Investors are now looking for assets that will have return but not necessarily be tightly correlated, Walsh said. "I think the calculations are getting harder because when you've got an 'everything rally,' correlations get closer to one."

Walsh said investors were worried after "Liberation Day" in April, when markets sold off together after President Donald Trump first made his tariff announcement. Even Treasuries sold off in tandem, defying the usual safety trade.

"Now we get correlations rising and moving toward one, but in the bull market, nobody's worried at all," she said.

Bitcoin has also hit new highs. But investors look at crypto differently than other asset classes, Walsh said.

"You've got two ends of the spectrum," she said. "You've got a risk off asset generally historically in gold, and you've got a very much risk-on appetite metric in Bitcoin."

She said the cryptocurrency, which is correlated to the Nasdaq, can continue to make gains. She sees bitcoin as a proxy for investor sentiment.

Recently, the Treasury market has been left out. Short-term yields have moved lower. The benchmark 10-year Treasury yield has been holding in a sideways pattern lately, trading mostly between 4% and 4.5% since June with a bias lower.

George Goncalves, head of U.S. macro strategy at MUFG, said the market seems to be in "suspended animation." The lack of government data, due to the shutdown, has also created somewhat of an information void.

"Uncertainties that usually stir up cross currents, even those are being ignored" by bonds, Goncalves said. He said the government shutdown, trade issues, and policy uncertainty have not rattled it recently. The 10-year yield was 4.13% Wednesday, just slightly below the level it was at when the government shut down Oct. 1.

The correlation will break when an event spooks markets. That probably won't be related to the shutdown, even if it drags on, Walsh said. She said, however, a reversal of President Donald Trump's tariffs were the administration to lose its case before the Supreme Court could be one such event, since the government is generating needed revenue from the tariffs.

Some gold strategists say the metal could soon take a breather but is likely to continue rising. Goldman Sachs this week raised its year end 2026 target to $4,900 per troy ounce, noting that investors buying exchange traded funds have helped spur the latest move higher and those buyers are expected to continue driving gold prices.

The research firm Bespoke studied gold rallies. The 20% surge in gold prices over the past 35 trading days is one of the strongest runs in recent history, it found.

"Gold is one of the more momentum-prone markets out there," Bespoke noted. "Similar surges to the one we've seen over the past couple of months have led to outperformance over six months and much more impressive gains a year later."

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October 09, 2025 14:06 ET (18:06 GMT)

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