S&P500 Praised, but Gold is Crushing it

The following chart compares the S&P500 to gold this year. Some analysts are praising U.S. stocks for their seemingly non-stop gains and have ruled out a recession in the next 12 months. What they seem to be ignoring is that gold's gains have massively outperformed even the S&P500 for the year.

Gold prices extended recent gains to new highs, as market uncertainty continued to drive demand for safe-haven assets. U.S. stocks also climbed on Friday, with the S&P 500 posting its 47th record close of the year, up 23% in 2024. Yet even as this bull market in equities presses onward, gold seems a key preoccupation for investors hedging against potential risks. Gold’s 31% rally in 2024 has completely outclassed the S&P 500's 23% gain. There seems to be a rotation inside the stock market happening as well. Major tech stocks have been challenged by major banks like Goldman Sachs and JPMorgan.

Slightly hot inflation data from September has raised concerns about the economic outlook and helped kick off a continued gold rally. Consumer prices rose at a slightly slower annualised rate than last month, but they still came in above expectations. Any data showing an increase in inflation is exactly what the current U.S. administration and Fed do not want to hear. That data has helped spur another rush toward gold. After the report, the U.S. dollar initially rallied, then pulled back, which helped extend gold's gains.

With geopolitical tensions and a New Year filled with economic fears, gold has climbed upward throughout 2024. Ongoing hostilities in the Middle East and doubts about inflation and world markets have helped keep demand for gold stable. The precious metal has been able to constantly reach fresh all-time highs, and many expect it to remain strong as investors seek protection from volatile market conditions.

One last thing to remember in the short term is that the U.S. presidential election is now very close. The current team has a huge incentive to make the economy look as strong as possible. Despite the Wall ST vs main ST political divide, many Americans' investments and retirement funds are tied to index funds and people want to feel like their net worth is increasing. This is especially important after the prices of everyday goods, such as groceries and gasoline have risen dramatically in the past several years. This puts pressure on the current government to increase liquidity now and worry about inflation later. Looking at the gold price, it seems that many investors are worrying about inflation now.