Brooks: Bitcoin & Gold No Longer Safe Havens
Economist Robin Brooks says both gold and Bitcoin have failed the “safe haven” test. Gold is no longer reliably uncorrelated with risk assets; it now behaves like a pro-cyclical, high-beta asset that tracks equities, including the S&P 500.
Brooks notes that gold’s correlation with the S&P 500 has surged to over 0.50 in recent months, moving higher in step with broader risk sentiment. He contrasts this with the typical regime where gold correlation is near zero.
For Bitcoin, historical correlation has been modest (often below 0.15), but during the “debasement trade” peak in late 2025 to early 2026, Bitcoin’s correlation with equities jumped as high as 0.55. Brooks says gold’s behavior has now converged with Bitcoin’s—“precisely on par,” an unprecedented setup for a true safe haven.
The driver, according to Brooks, is a retail-driven shift in positioning. A sharp run-up in gold prices has mechanically expanded central bank balance sheets, but Brooks argues there hasn’t been a sudden institutional buying frenzy. Instead, widespread marketing around a debasement trade brought in retail “tourists,” who he believes are more skittish and risk-sensitive than traditional bullion holders.
For traders, this challenges the use of Bitcoin or gold as crisis hedges and implies that both may sell off alongside equities during risk-off moves.
Bearish
This news is bearish mainly because it attacks the core “hedge” narrative. Brooks argues that both gold and Bitcoin have shifted from low-correlation behavior to equity-like tracking (gold correlation with the S&P 500 >0.50; Bitcoin correlation that previously rose to as high as ~0.55 during late-2025/early-2026). If BTC and gold move together with equities, traders lose diversification benefits when markets turn risk-off.
Short-term, this can pressure positioning: hedging demand may weaken, and risk-off events could trigger more synchronized selling between BTC, gold proxies, and equity-linked instruments. Traders may respond by reducing “crisis hedge” allocations or rotating toward truly defensive setups (e.g., cash/stables, or low-beta assets).
Long-term, the retail-driven explanation matters. If retail “tourists” remain the marginal buyer (more pro-cyclical, more skittish), volatility and downside reflexivity can persist when correlations stay elevated. A parallel can be seen in past regimes where macro narratives and flows changed market structure—correlations rose, breakouts failed to hold, and “safe haven” labels were gradually repriced.
Overall: higher BTC-equity linkage reduces the probability that BTC will perform as a hedge during drawdowns, which is why the expected impact is bearish for trading sentiment and market stability.