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Key Takeaways
- The price of gold has surged about 22% this year, outpacing returns on stocks.
- Traditionally, gold has served as a safe haven for uncertain investors. But it has somewhat defied that notion this year.
- Persistent demand for gold from global central banks may offer one explanation.
The price of gold hit another all-time high Tuesday, defying the notion that returns on the precious metal peak during periods of financial market distress.
Gold’s spot price rose as high as $2,543.76 per troy ounce in the spot market, at that point up 1% from Monday, representing the latest record in a year in which the precious metal has surged about 22%. That increase has coincided with this year’s 18% gain in the S&P 500 Index.
Recently, gold has traded more in line with stocks than as an alternative to them.
After the S&P 500 reached an all-time high of 5,667.20 on July 16, it fell 8.5% in the next three weeks, sinking to a three-month low. But despite that drop, investors didn’t widely flock to gold, which fell 2.3% in the same period.
Since then, stocks have rallied, with the S&P 500 rebounding 8.1%. Gold has done the same, advancing 5.2%.
Central Banks Underpin Demand
Of course, gold doesn’t always rise when stocks fall, or vice versa. But investors traditionally have parked assets in gold as a safeguard against turbulence in global financial markets, inflation, and economic uncertainty.
Though some concern about a slowdown persists, U.S. economic growth has exceeded expectations this year as inflation moderated. Globally, stock markets have posted strong gains and bond markets also have advanced.
One might expect the return on gold to trail stocks in that scenario. Instead, gold has outpaced equities this year.
Demand from global central banks may offer one explanation. They bought a record amount of gold in the first half of the year, 5% more than the record high established in last year’s first half.
That demand likely has persisted and may continue into 2025, according to the World Gold Council. The group’s latest survey of central bank reserve managers, conducted between February and April of this year, indicated that 29% planned to increase gold reserves in the next 12 months, the highest level since the survey began six years ago.