Investors have been climbing the proverbial wall of worry to new record highs on the stock market this year, fearful with each step that the market is about to have a reversal.
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Meanwhile, gold’s move to record highs has been far more impressive, and buyers seem to have no worry that the end of their rally is in sight.
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Stocks, as measured by the Standard & Poor’s 500, were up roughly 9.4% through August 8 – though they were up nearly 28% since the market bottom on April 9, the day when President Donald Trump paused tariffs just days after announcing them.
Meanwhile, gold has soared by 29.5% this year, through August 8, standing at roughly $3,460 an ounce. Its gain since the post-tariff announcement low is roughly 18%, but gold also didn’t suffer as much as stocks in the meltdown that accompanied the tariff news.
The three-year annualized average return on gold, as measured by SPDR Gold Shares (GLD) , is 23.4%, well above its historic averages; from 1971 to 2024, the annualized return on the shiny stuff was just under 8%.
Up nearly 30% this year, gold may have peaked.Image source: Naowarat/Shutterstock
Gold’s rise hasn’t been as a result of its traditional role as a hedge against inflation, because it normally takes a protracted time period with prices rising by more than 5% for gold to kick in that way.
Instead, gold has been seen as an ideal hedge against geopolitical risk, the fighting in Ukraine and Gaza, the prospect of trade wars coming from the tariffs, and more.
With no end in sight to those problems, plenty of investors have become gold bugs, looking to precious metals for protection and profits in times of uncertainty.
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And while buying gold now – or stocks, for that matter – can feel a bit like showing up late to the party, most industry watchers are suggesting that full-steam ahead is more likely than some reversion to the mean.
While there is no shortage of caution and nervousness, there is no widespread call for recession even into 2025. Plenty of market observers saying that rate cuts (whenever they start) and the economic benefits of deregulation – the next big component of President Trump’s economic plan – will offset the headwinds to keep things moving forward, albeit moderately.
And plenty of gold analysts make a case for the gold rally to continue.
“This gold bull market might be a little bit old in the tooth … it started in 2016,” said Thomas Winmill, manager of the Midas Discovery Fund (MIDSX) , in an interview on the August 4 edition of “Money Life with Chuck Jaffe.” “It’s up over 300% in those nine years. That has not happened very often. The average bull market for gold is about 53 months, according to my research, and this is over 110, almost twice the normal length.”
Still, Winmill insisted gold is not overpriced: “If you adjust the former high, which was reached back in 1988, for inflation, we’re actually below that high, which inflation-adjusted would be about $3,500 an ounce.”
“The basket of gold stocks represented by the Gold Bugs Index hit a high of 600 in August of 2011 when the gold price hit 1800,” Winmill added, “and that index is well below that now, in the 400 range, about 430. So, on that score, we’ve got 50% to go in gold stocks.”
On the other side of that trade is veteran commodities and futures analyst Carley Garner, senior strategist at DeCarley Trading, who said in an interview from the August 5 edition of “Money Life” that it’s a “sell-the-rallies market in both gold and silver, and the reason I think that is I believe the U.S. dollar has bottomed, and I think it will continue to work its way higher.”
Garner said that move in the dollar changes the landscape for a lot of commodities, but particularly the metals, and especially in times when gold “is probably the most volatile it’s ever been.”
It’s not the volatility that concerns Garner so much as the price, especially because, she said, “A lot of people are putting money in gold just because it’s going up.”
“But I’ve lived through 2011,” she added, “and I remember all of the same stories that are circulating in gold, all the reasons to buy it. ‘The central banks are buying this and that. You can’t trust the dollar,’ so on and so forth.
“All of those things were narratives in 2011, and gold topped, and then took a 50% haircut, and it took a decade to get back.”
Garner added that a 50% haircut is not just a possible scenario, but also “might actually be what could be around the corner.”
Garner noted that she isn’t trying to predict anything, but rather is reading the probabilities. While her take on gold is sour, her take on the stock market isn’t much better, with a probability of being much lower than current levels before it can trade significantly above them.
She noted a trend line in the monthly chart of the S&P 500 futures, looking at high points, that “comes in right around 6,000 [on the S&P index]. So can we go above 6500? Sure. But the odds that we see higher than that here in the next handful of months, are pretty slim.
A more likely scenario is we get continuation of the consolidation or the pullback. But the problem is, I don’t see any good support on a monthly chart until we get into the low 5000s.”
In her personal portfolio, Garner noted that she is heavily overweight Treasury securities. She has used this strategy before to ride out rough patches until the market made her more optimistic.
“Treasuries, regardless of where you look at the curve, are paying 4% to 5%,” Garner said. “And if you hold expiration, you get that money.…So I’m just playing the odds here. And the odds are Treasuries are [a] much better buy than stocks.”
