Barron's: Gold's Rally Reflects the U.S. Deficit. Neither Is Ending Soon
Article by Randall W. Forsyth in Barron's
The current boom in artificial-intelligence stocks has provoked more than a bit of déjà vu for those who lived through the dot-com bubble that burst around the turn of the 21st century.
But what is especially striking is the contrast between the current economy and that of the 1990s—a contrast most evident in the divergent performance of gold, which soured back then and is soaring now. Both moves correspond to the wildly different fiscal situations facing the U.S. in these two eras.
The yellow metal surged past the $4,000-an-ounce mark, a more than 50% vault since the beginning of the year. Gold has been moving up in a fairly straight line since breaking decisively above the $2,000 mark for the first time in early 2024.
That is a dramatic contrast with the 1990s, when gold fell from over $400 an ounce at the beginning of the decade to a low near $250 by 1999. Meanwhile, U.S. stocks enjoyed a giddy ascent, with the S&P 500 index increasing fivefold to its peak of more than 1,500 by March 2000. Then, gold truly seemed a barbarous relic, as John Maynard Keynes famously dubbed it, even more than greenbacks stuffed in a mattress.
You wouldn’t know it from the headlines of the past week about bullion’s record, but it’s just barely at a new high after inflation. In real terms, gold only recently topped its peak above $800 reached in the frenzied ascent of January 1980 (adjusted by the consumer price index, using the latest reading, for August).
So, by this criterion, the metal has only recently reassumed its status as a store of value.
But from its 1990s nadir, gold has actually outpaced stocks in this century.
Put differently, the S&P 500, measured against gold, is almost 70% lower than its peak 25 years ago, according to ......