[Financial Planning for the 100-Year Life] Can Gold and Stock Prices Continue to Rise Together?

From 1970 to 2019, gold prices and stock prices moved in different rhythms. When one rose, the other tended to fall. However, since 2020, the prices of both assets have been rising together. Will this upward trend continue in the future?

The 1970s marked a turning point for the global economy. With the collapse of the Bretton Woods system and the end of gold convertibility, gold began to be actively traded on the market. During this period, inflation triggered by the oil shock stimulated demand for gold, causing its price to surge. The price of gold, which was $34.94 per ounce in January 1970, soared to $666.75 per ounce by September 1980, a 19.1-fold increase. In contrast, the S&P 500 rose by only 1.3 times during the same period.

The era from 1980 to 2000 belonged to stocks. Former Federal Reserve Chair Paul Volcker's high interest rate policy curbed inflation. In the 1990s, the information and communications revolution improved productivity, enabling the U.S. economy to achieve both high growth and low inflation. Notably, from 1996 to 2000, the average annual labor productivity growth rate was 2.9%, a significant improvement over the previous 25-year average of 1.5%. During this period, the U.S. economy grew at an average annual rate of 4.3%, while the personal consumption expenditures (PCE) inflation rate remained low at 1.7%. Based on this "new economy," the S&P 500 soared to 1,408.11 at the end of 1999, a 13.1-fold increase from the end of 1979. However, gold prices fell by 43.8% over the same period.

In the 2000s, the dynamics between gold and stocks shifted once again. The collapse of the dot-com bubble, the September 11 attacks, and the subsequent global financial crisis heightened investors' risk aversion, bringing renewed attention to gold. From December 1999 to August 2011, gold prices rose 6.3 times, while the S&P 500 fell by 13.4%.

Since the global pandemic in 2020, gold and stock prices have been rising together. Between December 2019 and September 2025, gold prices increased 2.5 times and the S&P 500 rose 2.1 times, showing similar rates of increase. This appears to be driven by increased liquidity pushing up the prices of both assets. According to the International Monetary Fund (IMF), the global economy shrank by 2.8% in 2020 due to the pandemic, the lowest growth rate since the IMF began publishing global economic statistics in 1980. In response, central banks worldwide injected unprecedented amounts of liquidity. In particular, the U.S. Federal Reserve lowered its benchmark interest rate to 0.00-0.25% and supplied nearly $5 trillion through quantitative easing. The flood of money into the market flowed into both gold and stock markets, driving up the prices of both assets.

Additionally, the increase in U.S. liquidity led to expectations of inflation and a decline in the value of the dollar, pushing gold prices above $4,000 per ounce. Meanwhile, the growth expectations for the artificial intelligence (AI) industry, to the extent that it is being called an AI revolution, have driven the S&P 500 to record highs.

The problem is that both gold and stock prices have entered overvalued territory. Based on estimates using the dollar index, U.S. Consumer Price Index (CPI), and 10-year Treasury yield, gold prices were about 30% overvalued as of the end of September. The degree of overvaluation for the S&P 500 is even more severe. Traditional indicators such as the price-to-earnings ratio (PER) for the S&P 500 are more than 50% higher than their historical averages. When looking at the stock market in terms of gross domestic product (GDP) or broad money supply (M2), the level of the stock market bubble exceeds that of the IT bubble in 2000. For the entire U.S. stock market, the Buffett Indicator (market capitalization/nominal GDP) is estimated at 349% in the third quarter of 2025, far surpassing the 210% seen in the first quarter of 2000. Furthermore, the proportion of stock market capitalization relative to M2 reached 484% in the third quarter of this year, higher than the 443% recorded in the first quarter of 2000.

In the process of correcting this overvaluation, both gold and stock prices may fall together in the short term. After that, the outlook will depend on various factors, including inflation, the Federal Reserve's monetary policy, the dollar index, and geopolitical risks. Gold and stocks symbolize the "anxiety and hope" of each era. Considering the internal and external imbalances inherent in the U.S. economy (with government and external debt at all-time highs) and the relative weakening of U.S. power leading to increased geopolitical risks, the word "anxiety" is likely to be heard more often than "hope." It seems likely that the next decade will see gold prices rise more than stock prices.

Kim Youngik, Director of the Tomorrow Hope Economy Research Institute