The price of gold and the S&P 500 both hit new all-time highs after the Federal Reserve signaled it still plans to cut interest rates this year.
Both assets have had a strong first quarter in 2024, and as they reach new all-time highs, you may be wondering which is the better investment.
First of all, the reality is that you don’t have to choose: a diversified investment portfolio typically includes a mix of stocks and bonds, and some experts recommend also including gold investments as a “safe haven” asset (usually no more than 5 to 10% of your portfolio).
Gold, which trades at about $2,180 per troy ounce, has risen about 6% this year and 11% over the past 12 months, partly due to expectations of interest rate cuts and high levels of central bank purchases.
There is usually an inverse relationship between the price of the precious metal and interest rates. When interest rates are high, opportunities in fixed income investments can drive investors away from gold. Additionally, high interest rates strengthen the dollar, which tends to hurt gold as the metal is considered a hedge against inflation.
With all this in mind, it’s no surprise that gold gained momentum when Fed officials indicated last week to expect three interest rate cuts in 2024. Meanwhile, stocks also appear to have received a boost and the index S&P 500 rose to around 5,230.
Gold vs stocks: which is the better investment?
Stocks have generally performed better than gold over the years, but there can be exceptions. Looking back 20 years, for example, gold has outperformed the S&P 500 Index.
However, historical data does not mean that stocks guarantee higher returns in the future, as past performance is not indicative of what will happen next.
Here’s a look at how gold and stocks have performed over time:
Gold vs. S&P 500 – Year to date
- Gold: From $2,059 to $2,180 (+5.9%)
- S&P 500: from 4745 to 5227 (+10.1%)
Gold vs. S&P 500: 3 years
- Gold: from 1,729 to 2,180 dollars (+26.1%)
- S&P 500: from 3879 to 5227 (+34.7%)
Gold vs. S&P 500: 5 years
- Gold: From $1,322 to $2,180 (+64.9%)
- S&P 500: from 2796 to 5227 (+86.9%)
Gold vs. S&P 500: 20 years
- Gold: From $416 to $2,180 (+424%)
- S&P 500: from 1091 to 5227 (+378.9%)
Gold vs S&P 500: 40 years
- Gold: From $387 to $2,180 (+462.7%)
- S&P 500: from 157 to 5227 (+3,232%)
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