Stocks & Gold: Why One Shared Trend Is Dangerous

XAU/USD

Key zone: 4,250.00 - 4,350.00

Buy: 4,400.00 (on a strong positive foundation); target 4,600-4,650; StopLoss 4,320.00

Sell: 4,250.00 (on a strong breakdown of the 4,300 level); target 4,000.00; StopLoss 4,320.00

The modern market is full of anomalies, but one of them leaves beginners confused and gives professionals a nervous twitch. Gold behaves as if the world is once again living through the inflationary storm of the 1980s, while the stock market resembles the dot-com era with its euphoria and recklessness.
Classical theory asserts that gold and stocks should not rise simultaneously. Historically, their correlation was zero, but old models no longer work. Let us recall: the money that enters the market never disappears from its process. It merely gets redistributed. Trillions of dollars injected by governments into the economy during and after the COVID-19 pandemic still feed all market assets — from stocks to gold.

It is commonly believed that gold rises because investors seek protection from political uncertainty, military conflicts, and erratic politicians. But then why do the same investors show misplaced optimism toward American AI stocks while ignoring the volatility risks of gold? Especially since there are now direct and cheaper ways to hedge — for example, buying PUT options on stocks.

The main reason for the current anomaly is excess liquidity. For instance, the volume of funds placed by American investors in money market mutual funds has reached $7.5 trillion — $1.5 trillion above the long-term trend.

The growth of liquidity fuels risk appetite: the stronger the belief in asset growth, the more capital flows into the market. American households are actively increasing their stock operations, assuming that in case of crisis, the government will step in and protect the market. New digital platforms with low commissions have made trading instant and widespread, amplifying the effect of an uncontrolled liquidity flow.

As a result, the decline in the risk premium has become a catalyst for an unstoppable influx of capital.

Gold’s rise accelerated sharply after 2022, when the dollar turned into a tool of sanctions policy, and central banks began to view the precious metal as an alternative reserve currency. Now, investors’ focus has shifted to gold ETFs: their share of gold demand has reached 20%, and fund inflows have increased nearly ninefold.

Arguments about the “fear of the dollar’s collapse” have lost relevance — the U.S. currency remains stable, while gold continues to renew historical highs. Bond market indicators also do not confirm inflationary risks: yields correspond to inflation expectations at around 2.5%.

At the same time, other assets far from defensive are also rising: silver, platinum, leveraged ETFs, unprofitable tech companies, and junk bonds with weak oversight.

All of this will fall just as synchronously.

If consumer inflation accelerates again and the Fed is forced to tighten monetary policy, investors will face an unpleasant discovery: gold will decline along with tech stocks, finally shattering the myth of its role as a reliable market safe haven.

So we act wisely and avoid unnecessary risks.

Profits to y’all!