Gold and S&P 500 Near Record Highs—Which Will Crack First?

Gold and Stocks Surge: Can Both Keep Rising?

Gold is trading near record highs, while the S&P 500 hovers just below its all-time peak. Traditionally, investors choose between hard assets like gold and equities based on market conditions, but both are rallying simultaneously. This unusual alignment has led analysts at UBS and Goldman Sachs to revise their gold forecasts higher, while technical strategists warn that stocks may be nearing a pullback.

UBS and Goldman Sachs See More Upside for Gold

UBS has raised its gold price forecast to $2,900 per ounce by year-end, citing strong investor sentiment and macroeconomic uncertainty. Strategist Joni Teves believes gold could hit $3,200 later this year, fueled by limited positioning and liquidity issues in the London market. Goldman Sachs has an even more aggressive outlook, lifting its gold target to $3,100, with a potential surge to $3,300 if policy uncertainty remains high.

Central bank demand is a key driver, with continued official purchases expected to keep the market well-supported. Additionally, concerns over fiat currency debasement, the U.S. fiscal deficit, and geopolitical risks are prompting investors to increase gold holdings.

S&P 500 Near Record Highs But Faces Seasonal Weakness

While gold is rising on safe-haven demand, the S&P 500 is also approaching new highs. However, BTIG technical strategist Jonathan Krinsky warns that weak seasonal factors could trigger a short-term pullback. The index has traded within a tight range for months, and while a breakout is possible, momentum is fading.

Only 60% of S&P 500 stocks are above their 50-day moving averages, signaling that not all sectors are participating in the rally. Additionally, small-cap stocks are underperforming, with the Russell 2000 ETF hitting its lowest relative level since July.

Investors Are Growing Cautious on Stocks

Despite the S&P 500’s strength, investor sentiment is turning cautious. The latest AAII survey shows bearish sentiment among individual investors at its highest level since late 2023, fueled by concerns over trade policies, inflation, and fading expectations for interest rate cuts.

Outflows from U.S. equity funds reached $11 billion in January, reversing strong inflows from December. Investors are rotating into defensive sectors like utilities and healthcare while trimming exposure to high-growth tech stocks.

Market Outlook: A Crossroad for Gold and Stocks

Gold remains in a strong uptrend, with central bank demand and macro uncertainty supporting further gains. Meanwhile, the S&P 500 is at an inflection point—if it breaks out, momentum could extend higher, but seasonal weakness and narrowing breadth raise the risk of a pullback. Traders should watch key technical levels and sentiment shifts as markets move into a critical period.

More Information in our Economic Calendar.