TLDR
- Gold has surged 90% over the past year while the S&P 500 gained only 15%, a divergence that has happened just four times in 100 years
- The US Dollar Index has fallen 10.5% over the past year, making gold cheaper for foreign buyers and contributing to its rally
- Gold futures jumped above $5,300 per ounce on Wednesday as investors moved away from fiat currencies and government bonds
- Silver has surged 48% since the start of the year, reaching $112 per ounce, while platinum gained 29% to near record highs
- Central banks are maintaining strong demand for gold while reducing exposure to government bonds due to geopolitical tensions and fiscal debt concerns
Gold futures climbed above $5,300 per ounce on Wednesday, extending year-to-date gains to 20%. The rally comes as the US Dollar Index has fallen 10.5% over the past year, making the precious metal more attractive to foreign buyers.
The price surge marks a historic divergence from stock market performance. Over the past year, gold has jumped 90% while the S&P 500 gained just 15%. According to Stifel Chief Equity Strategist Barry Bannister, this level of outperformance has only occurred four times in the past 100 years.
Bannister noted that stocks were range-bound for years after similar episodes in the past. The pattern suggests challenging times ahead for equity markets.
The dollar’s weakness has played a key role in driving gold prices higher. Robin Brooks, senior fellow at the Brookings Institution, said dollar weakness is “supercharging” the rise in gold. The currency’s decline has added fuel to what he called the “crazy rise in precious metals.”
Investors Move Away From Fiat Currencies
A trend known as the debasement trade has emerged, with investors buying hard assets to protect purchasing power. Ole Hansen, head of commodity strategy at Saxo Bank, pointed to unchecked fiscal debt creation eroding confidence in fiat currencies. This concern has pushed investors toward gold and other precious metals.
Expectations of easier Federal Reserve policy may be contributing to this shift. Polymarket shows growing odds that President Trump’s next pick for Fed chair could be Rick Rieder, BlackRock’s head of global fixed income. Rieder favors aggressive rate cuts.
The Federal Reserve is expected to keep interest rates steady at the conclusion of its two-day policy meeting on Wednesday. Central banks have maintained strong demand for gold while reducing exposure to government bonds.
Geopolitical Tensions Support Precious Metals
Rising geopolitical tensions have helped drive the bullion rally. On Wednesday, President Trump said a “massive Armada is headed to Iran,” threatening military action unless Tehran agrees to negotiate. Trump wrote on Truth Social that he hopes Iran will “quickly ‘Come to the Table’ and negotiate a fair and equitable deal.”
Other precious metals have also seen strong gains. Silver jumped to $112 per ounce on Wednesday before pulling back slightly. The metal has surged 48% since the start of the year.
Strong demand from China and restrictions on silver exports have lifted prices. Platinum hovered near record highs on Wednesday with a 29% gain. Copper prices remained steady after topping $13,000 for the first time in London last week.
The combination of dollar weakness, geopolitical risks, and concerns about fiscal policy has created a perfect environment for precious metals. Gold’s rise above $5,300 per ounce represents a 20% gain for the year so far. The precious metal continues to attract investors seeking alternatives to government bonds and fiat currencies.
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