Investment Strategist Robin Brooks Claims Traditional Refuges Lose Luster as Bitcoin and Gold Struggle to Provide Stability

Renowned economist Robin Brooks has made a striking assertion: gold's long-standing reputation as a safe-haven asset has been severely diminished. Nowadays, the precious metal is exhibiting characteristics of a high-risk, pro-cyclical asset, eerily mirroring the volatility of risk-driven markets such as the S&P 500 and Bitcoin. Brooks posits that the bygone era of gold's relative stability, impervious to fluctuations in risk appetite, is a relic of the past.

Historically, gold's correlation with the S&P 500 was practically negligible, hovering around zero, while Bitcoin's correlation with equities was modest, at approximately 0.15. However, during the late 2025 to early 2026 period, characterized by the "debasement trade," Bitcoin's correlation with equities surged dramatically to 0.55. Concurrently, gold's correlation with the S&P 500 began to rise noticeably. Astonishingly, over the past few months, gold's correlation with the S&P 500 has skyrocketed to over 0.50, drawing level with Bitcoin in an unprecedented development.

This newfound correlation implies that gold no longer serves as a reliable hedge during times of economic turmoil or geopolitical uncertainty. Instead, it now moves in tandem with equities, plummeting when risk aversion intensifies. Brooks notes that this behavior is diametrically opposed to the expected conduct of a genuine safe-haven asset.

The economist attributes this seismic shift to the broadening of gold's investor base, which has led to a permanent expansion of the market. The significant increase in gold prices over the past year has, in turn, inflated central bank balance sheets. However, Brooks points out that this growth is not a result of institutional buying or a mass exodus from the US dollar. Rather, the aggressive marketing of the "debasement trade" in late 2025 drew a substantial influx of retail investors into the gold market. These newcomers are more prone to making impulse-driven, pro-cyclical decisions, unlike traditional gold investors.

Initially, Brooks believed that the high correlation between gold and equities would dissipate as retail investors, which he terms "tourists," would be shaken out of the market during periods of correction. However, he has now revised his stance, convinced that the underlying dynamics of the gold market have undergone a fundamental transformation.