Gold's 29% YTD Gain: Can It Outperform the S&P 500?

Gold has been on a tear in 2024, up nearly 29% year to date, outperforming the S&P 500's 26.6% gain. This strong performance has investors wondering if gold can continue to outpace the broader market. Let's dive into the factors driving gold's rally and explore whether it can maintain its momentum.

Factors driving gold's rally

1. Geopolitical tensions: The ongoing Russia-Ukraine conflict and tensions in the Middle East have created a safe-haven demand for gold. Investors have been flocking to gold as a store of value amid uncertainty.
2. Central bank gold purchases: Central banks have been net buyers of gold in 2024, with purchases totaling 1,037 tonnes. This increased demand from central banks has contributed to gold's price appreciation.
3. Monetary policy: Lower interest rates can boost spending and weaken the U.S. dollar, which can raise the price of dollar-denominated gold. The Federal Reserve's recent rate cuts have supported gold's rally.
4. Inflation expectations: Gold is often seen as a hedge against inflation. With inflation running high, investors have turned to gold as a safe haven asset.

Can gold maintain its momentum?

Gold's strong performance in 2024 has some investors wondering if it can continue to outperform the S&P 500. Here are a few points to consider:

1. Historical performance: Gold has underperformed the S&P 500 over the last decade. However, when compared to other currencies, gold's performance is more favorable. For instance, using Japanese yen to buy gold, instead of investing in the Japanese stock market, would have been a superior investment.
2. Volatility: Geopolitical tensions and central bank policies can influence gold's volatility. When geopolitical risks are high, investors may be more likely to buy and sell gold quickly, leading to increased price fluctuations. Similarly, changes in central bank policies can cause gold prices to move more rapidly.
3. Diversification: Gold plays a crucial role in a diversified investment portfolio as a safe haven asset and a hedge against market volatility and inflation. Its unique characteristics make it an attractive addition to a portfolio that includes stocks, bonds, and other assets.



In conclusion, gold's strong performance in 2024 has been driven by geopolitical tensions, central bank gold purchases, monetary policy, and inflation expectations. While it's difficult to predict whether gold can maintain its momentum and outperform the S&P 500, its role as a safe haven asset and its historical performance suggest that it can play a valuable part in a diversified investment portfolio. As always, it's essential to do thorough research and consider your risk tolerance before making any investment decisions.