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Quick Take
Notably, in 2024 thus far, gold has outpaced the broader equity market, rising approximately 11% compared to the S&P 500’s 9% gain.
Gold vs SPX: (Source: TradingView)
Over the past 70-80 years, the relative performance of the S&P 500 and gold has fluctuated, with each dominating at different times, underscoring gold’s historical role as a hedge against economic uncertainty.
Historically, gold has demonstrated a tendency to outperform the S&P 500 during periods of uncertainty, notably observed from 1972-1996, which encompassed five recessions and in the aftermath of the 2008 financial crisis.
Gold vs SPX: 1950-2023: (Source: TradingView)
Several macroeconomic factors likely contribute to gold’s current robust performance. According to FRED data, the United States sizable deficits, total public debt as a percent of GDP exceeding 120% in Q4 2023, and escalating commodity prices suggest a potential for an inflationary rebound and ongoing global conflicts.
Total Public Debt as Percent of Gross Domestic Product: (Source: FRED)
With the federal funds rate at 5.25-5.50%, companies may encounter mounting challenges in servicing their debt in the upcoming year.
While rate cut expectations continue to be pushed back, the short-term treasury market is not anticipating a rate cut within the next six months because the yields on 3-month and 6-month treasury securities are higher than the Effective Federal Funds Rate (EFFR), according to Caleb Franzen, Founder of Cubic Analytics.
Fed Funds Rate vs US03MY/US06Y: (Source: TradingView)
Interestingly, Bitcoin, often likened to “digital gold,” has surged over 50% year-to-date. Should the digital asset continue to rally following the halving, it would reinforce its narrative as a hedge against economic uncertainty.
The post Gold outperforms S&P 500 YTD as economic uncertainty looms appeared first on CryptoSlate.
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