U.S. stocks extended their astonishing autumn rally on Monday, with the S&P 500 rising 0.3% to put the benchmark on pace for its best September run in more than a decade.
Investors are betting on a bullish mix of resilient economic growth, Federal Reserve rate cuts, and the ongoing boost from artificial intelligence investments. But they’re also hedging those wagers with gold, and that’s lifting the bullion to another all-time high, possibly on its way to hitting $4,000 an ounce by the end of the year.
The contrast is stark.
The S&P 500 is up more than 13.5% so far this year, and on pace for its best September gain since 2013, according to Dow Jones Market Data.
The economy is expanding at a 3.9% clip in the third quarter, based on the Atlanta Fed’s GDPNow forecasting tool, and analysts expect another year of double-digit earnings growth. Inflation, while higher than the Fed’s preferred 2% target, isn’t accelerating as quickly as expected as tariffs work their way through global supply chains.
But gold prices, which traditionally thrive when economies are beset by recession or inflation fears, continue to climb, with the precious metal trading at a record high of just over $3,800 an ounce.
Gold is up more than 49% so far this year, its best gain since 1979, according to Dow Jones Market Data, and has attracted a record $17.6 billion in investor inflows over the past four weeks. Bloomberg estimates the value of U.S. gold holdings have also topped $1 trillion for the first time on record.
Bank of America thinks the run can continue. It notes that while bullion prices appear elevated when compared to their 200-day moving average, a key technical performance gauge, it still only represents around 0.4% of private investor assets.
Gold’s underlying momentum could also be enhanced by its safe-haven status with a looming government shutdown, rising geopolitical tensions, and worries over the debasement of the U.S. dollar all lingering over financial markets into the final months of the year.
But the runway for stocks looks just as solid. The CME FedWatch tool is pricing in two more quarter-point rate cuts from the central bank before the end of the year, and LSEG data suggests collective S&P 500 earnings will grow by around 9% over the third quarter.
Labor market data, however, could be the key catalyst to the market’s advance over the final months of the year, and its weakness could be why investors continue to hedge the rally with gold purchases.
LPL Financial’s chief technical strategist, Adam Turnquist, notes that while Fed rate cuts are a powerful accelerant for stocks, those gains can be tempered by a softening job market.
Investors will navigate a host of data releases focused on employment this week, capped by Friday’s nonfarm payroll report from the Bureau of Labor Statistics. Analysts are looking for a modest gain of around 68,000 net new jobs for the month of September, based on FactSet forecasts, following the paltry 22,000 increase in August.
“Since 1950, when nonfarm payrolls turn negative for the first time in at least a year, the S&P 500 has delivered a median 12-month return of just 3.2%,” Turnquist said in a recent note.
“However, in the five instances that preceded a recession, the median return was -11.6%,” he added. “In contrast, when a downturn was avoided, the median return surged to 17.4%.”
The wide range of outcomes explains, at least to some degree, investors’ need for a potential hedge and gold’s incredible 2025 gains.
It also highlights the Fed’s current quandary, according to Rational Equity Armor Fund portfolio manager Joe Tigay.
“Cut rates too aggressively to prop up jobs? Hello, inflation and asset bubbles,” he said. “Don’t cut enough to support employment? Hello, recession and potential debt crisis.”
“Their ability to walk this tightrope without falling is going to be a key factor in how this whole thing plays out,” he added.