Gold and Stocks Hit Record Highs: Now What?
- Anibal Hernandez, CFA
- 7 days ago
- 8 min read
Gold and U.S. stocks are both hovering near record highs. For many investors, that feels contradictory: isn’t gold what investors buy when they’re worried, and stocks when they’re optimistic? In fact, it’s a rare economic occurrence.
When “risk-on” equities and “safe-haven” gold rise together, it usually reflects a more complex environment—optimism about growth alongside concern over risks. Let’s explore what’s driving both moves, how similar periods have played out in the past, and how to think about your own portfolio and long-term investment plan.
A Rare Meeting at the Peak
In more typical cycles, stocks and gold take turns leading. Stocks tend to perform best when earnings expectations are strong, policy feels predictable, and investors are comfortable taking risks. Gold, by contrast, tends to outperform when people worry about inflation, currency debasement, geopolitical shocks, or central bank credibility.
When both assets sit near all-time highs at the same time, it suggests investors are doing two things at once: leaning into growth and innovation while also buying insurance in case something goes wrong. That combination doesn’t automatically signal an imminent crash, but it does hint at a late or transitioning economic cycle, when both optimism and anxiety are elevated.
Why Gold Is So Strong Right Now
Gold has reached a record high of $4,000 an ounce this year, and the strength behind the bull run is not just about short-term speculation. Several structural forces have been supporting it:
Central-bank buying. Many central banks have been steady net buyers of gold, aiming to diversify away from the U.S. dollar, manage geopolitical and sanctions risk, and hold reserves that are not liabilities of any single government. That creates a persistent, policy-driven source of demand.
Geopolitics and policy uncertainty. Ongoing regional conflicts, shifting trade policies, and concerns about long-term debt sustainability all encourage investors to look for assets perceived as stable over decades, not quarters. Gold fits that role.
Real yields and inflation. Because gold doesn’t pay interest, its appeal is closely tied to real yields—interest rates after inflation. When real yields are low or expected to fall, the opportunity cost of holding gold declines. With inflation remaining persistent and central banks moving from aggressive hikes toward cuts, many investors see a supportive backdrop.
Hedging equity and AI concentration. For investors who worry that AI-related stocks and mega-cap tech may be priced for perfection, gold offers a way to diversify away from those concentrated risks without abandoning markets altogether.
Each of these drivers reinforces the others. Together, they help explain why gold can be hitting new highs even as equity markets remain strong.
Why Stocks Are Also Near Record Highs
If gold reflects caution, stocks currently reflect optimism—especially around technology.
A major driver is the belief that artificial intelligence could meaningfully raise productivity across the economy. Investors are betting that AI will transform how businesses operate, support demand for chips, data centers, cloud infrastructure, energy and open up entirely new revenue streams. That story has pushed up both earnings expectations and valuations, particularly for large technology and semiconductor names that heavily influence major indices.
Monetary policy is another important factor. After a rapid series of rate hikes to cool inflation, the Federal Reserve has shifted toward a more neutral or easing stance. Lower expected policy rates reduce the discount rate used in valuation models and ease financing conditions, both of which support equity prices. Even if the path from here is bumpy, markets broadly believe that “peak rates” are behind us.
The consumer, while facing persistent inflationary pressures, remains reasonably resilient. Unemployment is higher than its trough but still moderate by historical standards. Consumers are more careful but are still spending. Corporate earnings haven’t been flawless, but they’ve been good enough to justify at least part of the strength in stock prices.
The result is a market where investors can tell a coherent story for both assets: stocks represent growth and innovation, gold represents insurance and stability.
What History Tells Us
History doesn’t offer a simple rule like “gold and stocks at highs = crash,” but past episodes where both gold and stocks looked strong have often been followed by more volatile equity markets.
In the early 1970s, after the U.S. ended the dollar’s direct link to gold, both stocks and gold delivered strong returns for a while. The decade soon became dominated by oil shocks and high inflation. Equities went through a deep bear market, while gold ultimately staged a powerful multi-year bull run. That period highlights how, in an inflationary regime shift, gold can act as a hedge while equities reprice to a more challenging environment.
A different kind of stress showed up during the global financial crisis. In October 2007, U.S. stocks sat near record highs and gold near multi-decade highs. When the credit system began to unravel, equities fell sharply, while gold, after some volatility, held its value and eventually gained over the full crisis window. In a credit-driven downturn, the diversification benefits of gold often become more obvious.
The Post-COVID shock in early 2022 offered yet another pattern. Stocks and gold hit new highs shortly before a rapid 20-plus-percent decline in equities. Gold initially sold off as investors sought liquidity in anything they could sell, but later rallied to fresh records as rates were cut, stimulus surged, and real yields fell. In acute panics, correlations can temporarily spike, but gold has often recovered faster once policy responses kick in.
Today’s environment rhymes with elements of all three: late-cycle signals, elevated valuations, lingering inflation concerns, and a powerful new technology story. But public debt is higher, fiscal policy more active, and the AI theme unique. The lesson is not that history will repeat exactly, but that late-cycle optimism mixed with uncertainty can lead to higher volatility, especially for equities.
How Sophisticated Investors Are Reacting
Another useful signal is how large, sophisticated investors are behaving around AI and growth stocks. Some of the earliest and most successful investors have trimmed or hedged their AI exposure:
Large institutions and hedge fund managers, such as SoftBank and Peter Thiel, that profited from early AI gains have sold or reduced positions in major AI-related stocks.
Well-known contrarian investor, Michael Burry, has disclosed short positions in some of the market’s most crowded names.
These moves are not predictions of an imminent collapse, but they show that investors with significant resources are actively managing downside risk. For investors whose portfolios are heavily tilted toward technology—or whose net worth is closely tied to their employer’s stock—this is an important cue to review your overall exposure.
Central banks have also continued their purchases of gold and adding to their reserves. September 2025 saw the largest central purchases of gold with $39T of net gold purchases. Top investment banks have also provided a more bullish outlook for gold in their 2026 forecast than for stocks.
Investment Bank | Gold 2026 Fcst | S&P500 2026 Fcst |
Goldman Sachs | $5,055 | $7,600 |
Bank of America | $5,000 | $7,200 |
JP Morgan | $5,055 | $7,000 |
Ok, So Now What?
The key question is not “Will gold beat stocks?” or “Is the AI bubble about to pop?” It’s: How should you position yourself so your long-term plan can succeed across several possible futures?
A helpful way to think about it is to focus on actions rather than predictions:
1. Control Good Financial Habits
Control what you can control. Your biggest risk isn’t a single bear market – it’s not saving and investing consistently.
Before making large allocation changes, make sure you:
Hold 3–6 months of expenses in cash or cash-like assets (depending on risk tolerance).
Keep high-interest debt under control.
Aim for a sustainable savings rate (many professionals target 15–20% of gross income across retirement and taxable accounts).
Once those are in place, volatility becomes a normal part of the journey, not a threat to your plan.
2. Treat Gold as Insurance, Not a Core Growth Engine
Gold can make sense as part of a diversified portfolio, particularly if you’re worried about:
Inflation
Policy or geopolitical shocks
Concentration in high-multiple growth stocks
Unemployment
Historically high P/E ratios
But gold doesn’t produce earnings or cash flow. For most long-term investors, it’s better used as a modest risk-management tool rather than a primary growth driver. The appropriate allocation depends on your broader plan and risk tolerance.
3. Check Your AI and Tech Concentration
If a large portion of your net worth is tied to:
A handful of tech or AI names, or
Employer stock and RSUs in a single company
Consider:
Gradual rebalancing to reduce single-stock or single-theme risk
Adding diversified exposure to other sectors, styles, and regions
Coordinating sales with tax planning and vesting schedules
You don’t need to abandon growth or AI—but you don’t want your future to depend on one idea working perfectly.
4. Consider Professional Advice for Big Moves
Decisions like:
How much to tilt toward or away from equities
Whether and how to add gold or other alternatives
How to unwind concentrated equity positions
…are highly personal and tax-sensitive. A fiduciary advisor can help align your portfolio with your goals, time horizon, and risk tolerance—and help you stay disciplined when headlines are noisy.
Bottom Line
Gold and stocks at record highs don’t provide a simple “buy” or “sell” signal. They reflect a world that is excited about innovation and, at the same time, uneasy about inflation, policy, and geopolitics.
History suggests that when both assets are strong, future equity returns can be more volatile, and gold often earns its keep as a diversifier. For investors, long-term outcomes depend far more on how much you save, how diversified you are, and how consistently you stay invested than on correctly guessing the next six months of market moves.
Rather than making drastic bets, treat this environment as an opportunity to:
Revisit your financial plan
Check for concentration and downside risk
Ensure your portfolio can weather multiple possible futures
If you’d like a portfolio and plan tailored to your career, cash flow, and goals, this is a timely moment to explore a personalized wealth management conversation.
Sources:
JP Morgan 2026 Gold Forecast: https://www.reuters.com/business/jp-morgan-sees-gold-averaging-5055oz-by-late-2026-2025-10-23/
Goldman Sachs 2026 Gold Forecast: https://finance.yahoo.com/news/goldman-sachs-revisits-gold-price-191300756.html
Bank of America 2026 Gold Forecast: https://finance.yahoo.com/news/bank-america-revamps-gold-price-044158913.html
JP Morgan 2026 S&P500 Forecast: https://finance.yahoo.com/news/p-500-hit-7-000-111754177.html
Goldman Sachs 2026 S&P500 Forecast: https://www.morningstar.com/news/marketwatch/20251112156/where-goldman-sachs-says-the-sp-500-is-headed-next-year-and-in-the-next-decade
Bank of America 2026 S&P500 Forecast: https://finance.yahoo.com/news/p-500-could-soar-7-185244598.html
Disclaimer: Green Musa Capital has long and short positions in SPY and other S&P500 related positions, and long positions in GLD and other Gold related assets.
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