Why gold beat the Dow in a race

Financial markets recently reached two milestones.

- Marty Fridson

On Jan 26, gold hit $5,000 (157,342 baht) an ounce for the first time, and eleven days later, the Dow Jones Industrial Average cracked 50,000. Bullion got to its mark first - and that wasn't supposed to happen.Imagine if a prediction market in December 2020 had offered a proposition bet on which historic breakthrough would happen first. At that point, the Dow was already 61% of the way towards its big round number, while gold was just 37% of the way there.

Extrapolating data trends from 1985 through 2020, you would have expected the Dow to reach 50,000 by 2027 and gold not to hit the $5,000 target until 2035.

But gold's trajectory took an astonishingly sharp upturn in the last five years. Its price doubled between 2022 and 2024 alone. That surge helped the precious metal beat the stock index by what essentially amounts to a photo finish.

WHEN TRENDLINES FAIL

So why did the trendlines fail to predict the outcome?

In the case of the Dow, the index picked up speed in recent years as capital poured into US markets after the pandemic, but this surge was nothing compared to the rapid spike in the yellow metal.

Analysts have offered several explanations for the dramatic acceleration in gold's gains. One underlying factor is geopolitical instability.