MW Why gold may be in a new paradigm as the yellow metal soars in 2025

By Christine Idzelis

'Gold has outperformed the S&P 500 over the last 20 years by a wide margin,' notes DataTrek Research

Gold may be in a new paradigm after beating a widely followed gauge of the U.S. stock market over the past two decades.

"Gold has outperformed the S&P 500 over the last 20 years by a wide margin," according to a DataTrek Research note emailed Wednesday - with the yellow metal returning 616% over that period, while the S&P 500 gained 421%.

"This is not how things are 'supposed to be,'" said Nicholas Colas, co-founder of DataTrek, in the note. "The human ingenuity embodied in stocks should deliver better returns than a static, if precious, metal."

Gold (GC00) was trading around $3,405 an ounce on Wednesday afternoon, up around 29% so far in 2025, according to FactSet data, at last check. The S&P 500 SPX, an index of U.S. large-cap stocks, has lagged with an 8% climb year to date, based on Wednesday afternoon trading.

"We are potentially in a regime shift that benefits gold," said Aakash Doshi, global head of gold strategy at State Street Investment Management, in a phone interview Wednesday. Gold is "barely" off its record high, he noted, even as the U.S. stock market has rebounded sharply from its selloff following President Donald Trump's announcement of "liberation day" tariffs on April 2 - with the S&P 500 closing Tuesday at a fresh record high.

Gold is benefiting partly from demand for "alternative fiat assets" amid worries over government debt levels as well as a weaker U.S. dollar DXY, according to Doshi, with central banks increasing their purchases of the yellow metal since the 2020 pandemic and investors reallocating to exchange-traded funds that buy it.

"Gold has historically been a crisis hedge, underperforming during calmer periods in markets, but the 2020-present period suggests a new paradigm," Colas wrote in the DataTrek note. "Not only does it work when equity markets are volatile, but also when they are calmer."

While some of gold's recent outperformance arose during the pandemic crisis of 2020, the metal has been "a regular outperformer" since 2022, according to DataTrek. Its recent "high point" came in April amid worries over U.S. trade policy, said Colas.

Over the past two decades, gold's relative performance is "streaky, however, highlighting shifts in market sentiment," Colas added. For example, the metal had an "exceptional" relative run from 2005 to 2014, as "confidence in the global financial system was very low across most of this decade," he said, citing the global financial crisis in 2008 and Greek debt crisis in 2011.

"Since 2020, gold has been a reliable outperformer due to both geopolitical tensions and non-U.S. central-bank buying," said Colas. Many countries are "now adding the yellow metal to their reserve holdings as part of a long-term plan to diversify away from dollar-based paper assets."

See: 5 reasons Trump's second term has been so good for gold: 'It's becoming a core asset class,' CIO says.

Meanwhile, the full impact of tariffs remains uncertain, according to Doshi, who said the potential for inflation volatility may be fueling some of the interest in gold among investors.

The White House has been working on trade deals globally, with President Trump announcing on Tuesday evening over social media that the U.S. has completed one with Japan. The U.S. stock market has surged from its lows this year, with the S&P 500, Dow Jones Industrial Average DJIA and Nasdaq Composite COMP all trading higher Wednesday afternoon.

SPDR Gold Shares GLD, an ETF that buys the metal, was down 1.1% in afternoon trading Wednesday. The ETF has attracted more than $8 billion of inflows this year as of July 22, FactSet data show.

"We still like gold as a value-added addition to a diversified portfolio," said Colas.

-Christine Idzelis

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July 23, 2025 15:39 ET (19:39 GMT)

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