Skip to content

Why gold beating stocks’ might not be a good sign,’ according to strategist

Why gold beating stocks' might not be a good sign,' according to strategist
Paul L.
Stocks

The 2024 gold price rally, which has coincided with the growth of the S&P 500 index, could be signaling a concerning trend as markets witness a shift in investor interests. 

Since early 2022, gold has gained nearly 50%, compared to a 40% rise in the S&P 500 Total Return Index and a 20% drop in crude oil.

These trends suggest that the market may be increasingly wary of overvalued stocks and global instability, especially given that gold has risen during heightened geopolitical tensions, Bloomberg Intelligence commodity strategist Mike McGlone noted in an X post on November 9.

According to McGlone, the elevated ratio of U.S. stocks to GDP is a key factor contributing to gold’s resilience, even as the stock market has soared in an artificial intelligence-driven bull run.

Historically, high stock-to-GDP levels have aligned with periods where gold outperformed stocks.

U.S. stocks to GDP chart. Source: Bloomberg Intelligence

“The Rock Beating Stocks Might Not Be a Good Sign – Gold’s on-par performance with the S&P 500 the past three years may suggest it’s gaining an upper hand vs. the AI-driven stock market,” McGlone said. 

The expert observed a notable shift in geopolitical space in February 2022, when China and Russia declared an “unlimited friendship,” Since then, global risks have intensified, building on the metal’s traditional role as a hedge against periods of uncertainty. 

At the same time, the recent gold record highs have partly been influenced by growing geopolitical tensions in the Middle East, which pit Iran and Israel. 

What next for gold

Gold has reached new highs, targeting the $3,000 resistance level, which some analysts project could be achieved by 2025. However, following Donald Trump’s re-election, the yellow metal has retraced, testing the $2,600 support zone.

Gold one-month price chart. Source: TradingView

In an earlier post, McGlone noted that gold’s bullish performance, which has coincided with a booming stock market and 4% Treasury yield gains, suggests a shift in investor priorities, as investors are leaning towards safe-haven assets. 

He pointed out tha Trump’s second term, which could boost equities, may also support gold demand as a hedge against potential volatility.

The S&P 500 has also been on an upward trajectory recently, surpassing the  6,000 mark for the first time. This growth was partly inspired by market optimism surrounding Trump’s re-election. 

“Consensus that US equities will go up under a second term for President-elect Donald Trump might be a top factor buttressing gold,” he added. 

Notably, analysts view Trump’s policies, such as corporate tax cuts, as bullish for the general economy and the stock market. 

Although the index has surged to new highs, the technical setup raises concerns about a potential collapse, pointing to one of the worst crashes in history. 

In summary, as gold and stocks exhibit bullish momentum, there remains a level of uncertainty, meaning investors should potentially diversify between the two asset classes to mitigate any future risks.

Featured image via Shutterstock

Best Crypto Exchange for Intermediate Traders and Investors

  • Invest in cryptocurrencies and 3,000+ other assets including stocks and precious metals.

  • 0% commission on stocks - buy in bulk or just a fraction from as little as $10. Other fees apply. For more information, visit etoro.com/trading/fees.

  • Copy top-performing traders in real time, automatically.

  • eToro USA is registered with FINRA for securities trading.

30+ million Users
Securities trading offered by eToro USA Securities, Inc. (“the BD”), member of FINRA and SIPC. Cryptocurrency offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. Finbold.com is not an affiliate and may be compensated if you access certain products or services offered by the MSB and/or the BD

Read Next:

Finance Digest

By subscribing you agree with Finbold T&C’s & Privacy Policy

Related posts

Paul L.
Stocks

Sign Up

or

By submitting my information, I agree to the Privacy Policy and Terms of Service.

Already have an account? Sign In

Services

IMPORTANT NOTICE

Finbold is a news and information website. This Site may contain sponsored content, advertisements, and third-party materials, for which Finbold expressly disclaims any liability.

RISK WARNING: Cryptocurrencies are high-risk investments and you should not expect to be protected if something goes wrong. Don’t invest unless you’re prepared to lose all the money you invest. (Click here to learn more about cryptocurrency risks.)

By accessing this Site, you acknowledge that you understand these risks and that Finbold bears no responsibility for any losses, damages, or consequences resulting from your use of the Site or reliance on its content. Click here to learn more.