‘Gold is a high-beta asset’ and its safe-haven status is now ‘compromised’ – Brookings’ Brooks

Robin Brooks argues gold has stopped behaving like a classic safe haven and is instead acting like a high-beta risk asset, citing a roughly 10% drop over the past six weeks of war versus a decline of less than 1% for the S&P 500. His core claim is that gold now amplifies selloffs rather than hedges them, which is a notable shift for positioning and risk management in precious metals. Brooks says the recent move is not primarily explained by broad emerging-market central bank selling, except for Turkey, which reportedly cut gold holdings by 128 tonnes to support FX reserves and defend the lira. He instead points to the prior “debasement trade” rally as having attracted marginal buyers who are more likely to liquidate in stress, leaving the market more pro-cyclical and less defensive than investors assumed. He links gold’s multi-year rally to geopolitics and Fed policy, highlighting the April 2, 2025 “Liberation Day” shock, Powell’s Jackson Hole speech on August 22, 2025 as the key catalyst for the debasement trade, and the December 10, 2025 Fed cut as an additional leg higher. Brooks notes gold peaked near January 28, 2026 at almost 100% above year-ago levels, but says the rally became excessive and has since been partially unwound. For traders, the immediate implication is that gold’s correlation with risk assets has increased, so the metal may be trading more like a macro beta expression than a clean hedge until the latest speculative layer is flushed out. Near-term attention should stay on equity risk sentiment, Fed easing expectations, and whether the recent drawdown stabilizes enough for gold to reassert defensive characteristics.