Gold surged to a new all-time high on Tuesday, challenging the conventional view that its returns peak during financial market turmoil. The spot price of gold reached $2,543.76 per troy ounce, marking a 1% increase from Monday and setting a new record. This rise caps a remarkable year for the precious metal, which has appreciated by approximately 22% in 2024, paralleling an 18% gain in the S&P 500 Index.
Traditionally viewed as a safe haven during market distress, gold has recently shown a stronger correlation with equities rather than acting as a counter-cyclical asset. Following the S&P 500’s peak of 5,667.20 on July 16, which was followed by an 8.5% drop, gold did not see a corresponding surge. Instead, gold prices fell by 2.3% during the same period. However, as the S&P 500 rebounded by 8.1%, gold also climbed, increasing by 5.2%.
Gold’s performance this year has diverged from its typical role as a hedge against market volatility, inflation, and economic uncertainty. Despite ongoing concerns about economic slowdowns, the U.S. economy has outperformed expectations, inflation has eased, and both global stock and bond markets have posted strong gains. Under these conditions, one might expect gold’s returns to lag behind stocks, but it has instead surpassed equity returns.
A significant factor behind gold’s strong performance is robust demand from global central banks. Central banks purchased a record amount of gold in the first half of 2024, exceeding the previous record set in the first half of 2023 by 5%. This demand is likely to persist, with projections indicating that central banks may continue increasing their gold reserves into 2025. According to the World Gold Council’s latest survey, conducted from February to April, 29% of central bank reserve managers plan to boost gold holdings over the next year, marking the highest level of anticipated gold accumulation since the survey’s inception six years ago.
