[News Terms] Gold, Bitcoin, and Stocks All Rise, the 'Everything Rally'

Typically, the price of gold and the markets for Bitcoin and stocks move in opposite directions. When stocks or Bitcoin, classified as risk assets, rise, the price of gold, a safe-haven asset, falls, and when gold prices rise, stock prices decline. This is known as the ‘inverse (-) correlation’ between safe-haven assets and risk assets.

For example, during the early stages of the COVID-19 pandemic in 2020, when global financial markets froze, the price of gold rose from $1,500 per ounce to $2,000 by August of that year. In contrast, the Nasdaq index, which was around 9,800 in mid-February, plummeted to about 6,800 by the end of March, and Bitcoin also halved from 11.8 million KRW to 6.26 million KRW.

However, this investment formula has recently been broken. First, stock markets, led by the United States and Japan, have continued their bullish trend by hitting record highs. The S&P 500 index, a representative index of the New York Stock Exchange, soared to 5,175.27 on the 12th, and the Nasdaq also reached a new all-time high of 16,449.70 earlier this month. The upward trend in the Japanese stock market is also unstoppable. The Nikkei 225 index (Nikkei Stock Average) surpassed the 40,000 mark for the first time on the 4th and continued its rise by closing at 40,263.60, up 263.16 points (0.66%) from the previous trading day on the 19th, when the Bank of Japan raised its benchmark interest rate for the first time in 17 years.

The prices of gold and Bitcoin are also surging. This unusual market situation, where risk assets like stocks and Bitcoin, as well as safe-haven assets like gold, move together, is unfolding. This phenomenon, called the ‘everything rally,’ refers to a market in which the prices of almost all assets, including stocks, real estate, cryptocurrencies, and commodities, rise simultaneously.

The everything rally, which differs from typical investment markets, occurs when economic expectations, changes in financial policies, and international affairs intersect. For example, when the U.S. Federal Reserve (Fed) is expected to lower benchmark interest rates, it triggers expectations of a rate cut among investors, increasing bets on a decline in the value of the dollar. As a result, investors shift their investments from the dollar to other assets, which causes prices to rise as money flows into various risk assets such as stocks, real estate, and Bitcoin.

However, the recent everything rally, where even the price of gold, a safe-haven asset, is fluctuating alongside risk assets, is largely influenced by heightened geopolitical risks such as the Russia-Ukraine war and the Israel-Hamas conflict.