Better to follow the yellow brick road than stocks so far in 2024

investmentnews.com:

For all the talk about the S&P 500’s impressive 11.3 percent return prior to the Memorial Day break, it’s probably worth taking a quick gander over at gold too. Why? Because the yellow metal is up 13.1 percent since the start of the year.

That’s right stock jockeys, so far this year it’s been better to follow the yellow brick road than to track the S&P 500.

Max Belmont, a portfolio manager at First Eagle Investments, says gold’s upward trajectory may not end anytime soon, even if the bull market in stocks peters out, due to its distinctive historical role in financial markets.

“Gold has served as a store of value over millennia and its unique risk return characteristics have enabled it to maintain its real purchasing power over time,” said Belmont. “So we see gold as a potential counterweight to equities.”

Helping gold’s cause is America’s outsized national debt of $34 trillion, which exceeds the country’s $28 trillion GDP, says Belmont. The high debt-to-GDP ratio spurs inflation, which has traditionally been a boon for gold prices.

“We’re adding $1 trillion of debt every 100 days or so,” said Belmont. “We have globalization, and we have persistent inflation, so it feels that investors may be hedging and looking to gold as a way to mitigate the risks that arise from the expectation that the fed will cut towards the end of the year.”

Tom Graff, chief investment officer at Facet, says gold’s strength this year is fueled in large part by Chinese buying. And he warns that gold’s fortunes could turn just as quickly should they choose to slow their purchases.

“I think it is especially risky if indeed the Fed winds up leaving interest rates unchanged for the rest of 2024,” said Graff. “That could put a charge in the dollar