December 2024 - Week 3 Edition

Gold Still Beats Stocks over the Long Run

We have two more weeks until we reach the 25-year mark since the dawn of Y2K. Gold is still beating stocks by a spectacular margin in the 25 years since the new century and millennium began.  Gold is up 815%, which more than doubles the performance of the S&P 500 (at 313%) and the Dow Jones Industrials, at +280%. Gold also outshines the performance of silver, at +471%.

In our Gold Guide, we also trace the performance of gold vs. the two major stock indexes since the start of 1970 – and we update that table once a year, both in nominal terms and discounting for inflation.  Since the start of 1970, the Consumer Price Index (CPI) is up 737%, with gold rising 10 times more than inflation, at +7,489%. Stocks have risen less than gold, up 5,400% (Dow) and 6,500% (S&P).

This year, with two weeks remaining, it looks like gold will also beat stocks.  Through Monday, December 16th, gold and silver are both up about 28%, with the two main stock indexes up 27% (S&P 500) and 16% (Dow Jones).  The stock market generally has a “Santa Claus rally” in late December but gold might also stage a rally after the Federal Reserve’s (Fed) rate cut.

The Fed Will Likely Cut Interest Rates This Week, Helping Gold

Despite last Wednesday’s robust rise in the Consumer Price Index – and a surprising rise in some commodities in the Producer Price Index (PPI) last Thursday – the Fed is expected to cut interest rates by 0.25% on Wednesday – the third cut in a row during this cycle. If inflation keeps rising faster than expected, they may not cut rates much more in 2025 but BlackRock’s research has shown that in all Fed rate-cut cycles since 1990, gold has risen sharply in the next 12 months.

Specifically, gold has risen an average 5.1% in the first three months, 10.2% six months later, 12.9% nine months later and 14.3% after one year.  The first rate cut in this cycle was September 18th and gold was $2,560 on that day. If gold rises by the same percentages as in the past, it will be $2,690 later this week, $2,820 on March 18, $2,890 on June 18 and $2,925 next September 18th, well on its way to $3,000 by year’s end. I urge you to contact your professional representative to add rare gold coins to your collection and routinely add gold bullion to your investments and IRA portfolios. Here are those figures represented in table form:

Gold and silver are “treading water” early this week while they await the final meeting this year of the Federal Open Market Committee (FOMC), which meets eight times each year to determine monetary policy. They cut rates on September 18th and November 7th so this would mark a third straight rate cut. How the financial markets react may depend on the words of Chairman Jerome Powell’s statement and his press conference after the announcement.

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