Gold has risen by 37% since the beginning of the year, nearly four times the return of the S&P 500 index, despite the latter's strong rebound.

Gold is far exceeding Wall Street's top performers. The S&P 500 index has soared 1,650 points in less than five months, marking one of the strongest rises in decades.

However, according to the latest data from Apollo, gold has risen by 37% year-to-date, nearly four times the stock market's return rate. This is not a coincidence. Since the beginning of 2023, gold has accumulated a rise of nearly 100%, while the S&P 500 index has only increased by about 67% during the same period.

All of this is happening at a time when there is global heated discussion about artificial intelligence, calling it the most significant technological leap since the internet. Even so, this wave has not been able to push the stock market beyond gold. The question is not why gold is rising, but why other assets are still lagging behind.

Historically, gold usually only rises when situations worsen. It is a safe haven. When investors feel panic, they sell stocks and turn to buying gold, just as they used to choose bonds in the past. But now this relationship seems to have changed.

Inflation and debt rise simultaneously, gold and stock markets rise in sync

Since 2020, traditional models have been disrupted. Gold and the S&P 500 index are now showing synchronous movements. In 2024, the correlation between the two reached 0.91, a record high. This means that both are rising simultaneously, which is not a usual occurrence.

This change is related to the market's interpretation of inflation and debt. Long-term inflation expectations have been incorporated into asset pricing, while the government's massive spending is flooding the government bond market with new debt.

As the U.S. deficit approaches $20 trillion, Washington has to issue more bonds to keep functioning. This flood of bonds has led to a decline in prices. Bonds, once considered a reliable safe haven, have now become unstable. As a result, investors are abandoning bonds in favor of gold.

This demand has driven central banks around the world to accelerate their gold purchases. The amount of gold they currently hold has exceeded U.S. Treasury bonds for the first time since 1996. This shift is not coincidental. It indicates that even the most conservative institutions are turning from debt to precious metals.

The heavy debt burden also explains why the term premium is rising. The term premium, which is the additional reward that investors require for holding long-term debt, has jumped to 0.75%, the highest level since 2013.

As these risks rise, the demand for gold continues to grow. From the end of April to the beginning of May, there was a wave of buying for gold, coinciding with a sharp increase in the expiration premium.

Inflation breaks through the Federal Reserve's target, central bank buys gold in large quantities

At the same time, inflation expectations for the next 5 to 10 years are rising. The market no longer believes that the Federal Reserve can achieve the 2% inflation target. This has transformed gold from a hedging tool into a core asset.

As countries around the world cut interest rates to cope with job losses and economic weakness, inflation continues to rise. Central banks are trying to escape the predicament through spending. The result is: more deficits, more bonds, and increased demand for gold.

In the technology sector, the stock market has indeed received a slight boost. On Wednesday, the Nasdaq Composite Index rose by 0.6%, following a compromise ruling by a U.S. court on Alphabet's antitrust lawsuit.

Judge Amit Mehta ruled that while Gate can continue to operate its browser, it must stop signing exclusive search agreements and must open access to its search data. This allows Gate to avoid a complete crackdown.

The stock price of Gate's parent company rose by 8% after the ruling. This decision is seen as a victory for the company, primarily because it avoided the fate of being forced to split or shut down parts of its business.

Mehta tends to believe that artificial intelligence has created more choices for users, making Gate's dominant position less clear. However, even with this legal breathing space, and despite the overwhelming headlines about artificial intelligence, the stock market still cannot keep pace with gold.

Do you want your project to be seen by top figures in the cryptocurrency space? Showcase it in our next industry report, combining data with influence.

Disclaimer: This article is for reference only. Past performance does not guarantee future results.