Why gold's surge shows it's more than just a hedge for the stock market's record run

By Myra P. Saefong

Gold futures on Wednesday tallied their 44th record-high settlement of the year so far.

As gold surges to fresh record highs, it still may be the best hedge against everything investors fear right now about a U.S. stock market at its own record peaks.

"Tariffs, inflation, geopolitical instability and now rising unemployment are stoking fear, which is being driven by uncertainty and driving investors to hard assets," said Harley Lance Kaplan, a certified financial planner at Beta Industries, an independent financial-advisory firm in Plymouth, Mass.

Those fears have helped lift gold futures to never-before-seen heights. Fear and greed are two "very strong emotions, making it critical for investors to remove emotions from any financial decisions," Kaplan told MarketWatch.

On Wednesday, the December gold futures contract (GCZ25) (GC00) settled at a fresh record high of $4,070.50 an ounce on Comex. The S&P 500 stock index SPX also closed at an all-time high, ending at 6,753 points.

Read opinion column: Gold above $4,000: Is it too late to add it to your 401(k)?

Investors are likely seeking "some hedge against market volatility amongst an uncertain policy environment, including the growing U.S. debt burden, questions of [Federal Reserve] independence, and geopolitical and global trade uncertainties," said Rob Haworth, senior investment-strategy director at U.S. Bank Asset Management.

For the S&P 500, the key near-term factor is earnings growth and a solid third-quarter earnings season, while for gold, investors will need to see continued global central-bank gold purchases to continue to press higher, Haworth told MarketWatch. "A liquidity crunch would be a challenge to both markets," he said.

Before 2024, however, gold futures and the S&P 500 hadn't ever before closed at record highs on the same day, based on data going back to 1975, according to Dow Jones Market Data. Both briefly traded at or near record highs together in 2007 and in 2020, but nothing like the sustained climb seen over the past several months.

Yet it should not be a surprise to see assets rise across the board, given that this move in gold is largely being driven by "dedollarization and shifting exposure away from Treasurys," said Stefan Gleason, president and chief executive officer at Money Metals.

By surging past $4,000 for the first time ever this week, gold is "reinforcing its role as a hedge against accelerating fiat destruction and fiscal instability," he told MarketWatch.

Read: Why record-high gold prices aren't scaring away first-time investors

Already, futures prices for the precious metal have climbed by more than 50% this year.

Read archived story: If you love gold at near-record-high prices, why not wear it?

Gold is often seen as one of the few assets with low to zero correlation to the stock market, said Katy Kaminski, chief research strategist and portfolio manager at AlphaSimplex. Despite that, in the recent period, the short-term correlation seems to be somewhat positive as stocks and gold are up at the same time, she explained.

'If gold is seen as a hedge or diversifier in a state where general equity sentiment and growth numbers are positive, it may provide a place to hedge or offset the potential risk that equity-markets sentiment turns sour.'Katy Kaminski, AlphaSimplex

"If gold is seen as a hedge or diversifier in a state where general equity sentiment and growth numbers are positive, it may provide a place to hedge or offset the potential risk that equity-markets sentiment turns sour," said Kaminski.

As both the S&P 500 and gold prices continue their climb, however, market watchers are starting to grow wary.

For now, a number of markets are in "melt-up mode," and gold is one of them along with stocks, Ed Meir, analyst at Marex, told MarketWatch. "I'm not sure gold will go higher even if stocks come down, as we could instead see a meltdown that sweeps over all markets," he said.

Read archived story: Risky stocks and safe-haven gold are both aiming for records. Who will blink first?

"The problem for the bears, though, is that nothing being thrown at the markets is doing the trick," he added. That includes a much weaker dollar DXY in September - followed by a stronger dollar in October - rising inflation, evaporating jobs growth, a deceleration of tensions in the Middle East and, most recently, a U.S. government shutdown, he noted.

Meir said he's not sure what the "ultimate trigger" will be. With both equities and gold severely overbought, the market could be "in for a substantial correction when that catalyst finally materializes," he said.

-Myra P. Saefong

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10-08-25 1610ET