BIFURCATED SIGNAL

OWING TO GOLD'S HISTORICAL ROLE AS A STORE OF VALUE IN TIMES OF MONETARY STRESS, MANY SEE IT AS A HEDGE FOR A FUTURE IN WHICH US ECONOMIC EXCEPTIONALISM WANES

- Joseph H Davis

What are we to make of gold and US stocks, especially tech-heavy indices, recently hitting record highs around the same time? Traditionally, gold surges when equities correct; but this time, both have risen together, defying conventional wisdom. Faced with what look like increasingly frothy prices, analysts and commentators are wondering which asset is more overvalued.

But short-term considerations aside, the simultaneous rise in gold and AI-themed tech stocks may signal something deeper, opening a window onto our economic future and revealing something that economists, policymakers, and investors should not ignore. The prevailing outlook - steady GDP growth around 2% per year, with the inflation rate heading toward 2%, as projected by the Federal Reserve and others - does not align with a dual ascent for gold and stocks. Instead, the market is beginning to contemplate a future that is more complex.