Investors are panicking about U.S. stocks. Meanwhile, despite a minor sell-off in recent days, this often-forgotten asset is soaring…
It’s up double digits on the year while U.S. stocks have dropped 15%.
Of course, I’m talking about gold. Investors haven’t paid much attention to the metal in recent years. After all, why worry about a boring safe-haven asset when stocks are soaring?
Now, that dynamic has changed completely.
Gold isn’t just holding its own… It recently skyrocketed, even as stocks collapsed to near bear market levels.
That has led to the biggest outperformance we’ve seen in years. And according to history, that’s a good sign for gold and stocks.
Let me explain…
Gold Is Crushing Stocks… And That’s Good for Both Assets
Gold was a quiet winner in 2024. The metal jumped 27%, beating the S&P 500 Index. But since stocks were rising, too, few investors were paying attention.
That’s changing now… because gold has been rising while stocks fall.
Gold just catapulted about 15% higher in three months. Meanwhile, the S&P 500 dropped around 15% over the same time frame.
That means gold has outperformed stocks by about 30 percentage points over the past three months. That’s a rare and impressive feat.
The chart below shows the three-month rolling return difference between the S&P 500 and gold. When the reading is below zero, stocks are outperforming. When it’s above zero, gold is outperforming.
Take a look…
As the chart shows, we haven’t seen gold outperform at this rate since 2020… In fact, gold has only hit that level a handful of times over the past 25 years.
To see what this might mean going forward, I ran the data back even further. We’ve seen 18 similar setups since 1972 – which means this tends to happen once every three years. But these cases have been darn bullish for gold going forward…
Gold has been a fantastic long-term investment ever since the gold standard ended in the early 1970s. The metal is up about 8% a year since then. But you could do better after setups like we have right now…
Similar setups led to 3.2% gains in six months and 15.3% gains in a year. That’s about double the typical one-year return. And it means that the gold boom isn’t likely to end anytime soon.
Now, the interesting thing is that the individual results varied a lot. There were some big winners and big losers. But gold was up a year later more than 60% of the time… So the odds are good that gold will keep rising.
Not only that, but this bullish setup for gold isn’t a bad sign for stocks. The S&P 500 was up 11.1% a year after these extremes… which is a solid outperformance versus buying and holding over the same period.
So, this outperformance extreme tells us two things: 1) Gold can keep soaring from here… and 2) we shouldn’t give up on U.S. stocks. They could reverse and get back on track soon as well.
Good investing,
Brett Eversole
The DOGE Shock: Nine Stocks to Buy [sponsor]They say that DOGE's real agenda could shock the entire stock market in the coming days - sending a handful of widely unknown stocks soaring. And they've compiled the definitive investment playbook for anyone who wants the opportunity to capitalize. More here...
Source: Daily Wealth