Gold has never outperformed stocks to this extent when there isn’t a crisis or bear market

Gold has experienced an unusual 61% year-to-date surge in 2025, significantly outpacing the S&P 500's 14% gain, a rare outperformance given that both assets are simultaneously reaching record highs in a non-crisis environment. This dynamic, which is the worst relative equity performance since 2008 outside of a bear market, prompts Barclays to question whether gold or equities are the primary source of asset inflation or exuberance. Goldman Sachs, however, advises against betting against gold's consistent momentum, attributing its strength potentially to inelastic demand, particularly from central banks.

Analysis

Gold futures have surged an unprecedented 61% year-to-date in 2025, significantly outpacing the S&P 500's 14% gain, a rare occurrence given that both assets are simultaneously reaching record highs. This outperformance, with gold climbing above $4,200 an ounce and the S&P 500 topping 6,700, is notable as it deviates from historical patterns where gold typically outperforms during stock market downturns or economic crises. Barclays highlights this as the worst relative equity performance against gold since 2008, but uniquely, it's happening outside of a bear market.

Barclays' trading desk suggests this dynamic illustrates potential asset inflation, questioning whether gold or equities are the primary source of exuberance and advising caution regarding gold's abrupt ending. Conversely, Goldman Sachs' Tony Pasquariello advises against betting against the precious metal, citing its consistent momentum with 9 out of 10 months positive and a 60% YTD return. He attributes this strength potentially to inelastic demand, particularly from central banks, or its non-leveraged balance sheet nature.

The sustained rally in gold, despite its lack of intrinsic value or yield, suggests strong underlying demand drivers that transcend traditional safe-haven motivations. This unusual market behavior, where a traditional safe-haven asset thrives alongside a robust equity market, challenges conventional investment narratives. It implies a complex interplay of factors, including potential inflation concerns or a debasing currency narrative, as noted by Barclays.

Key Decisions for Investors

• Investors should monitor the sustainability of gold's rally, especially given Barclays' caution on potential exuberance and its historical correlation with crises.
• Consider the implications of central bank demand and inflation narratives as potential drivers for gold, as suggested by Goldman Sachs, rather than solely traditional safe-haven demand.
• Evaluate portfolio allocations to gold, acknowledging its strong momentum and potential for continued outperformance in an 'inflating assets/debasing currency' environment, while being mindful of its lack of intrinsic yield.