The U.S. stock market and gold prices have both hit record highs, reflecting the diverging sentiments of investors: optimism towards risk assets and simultaneous rising demand for safe havens.
Since the sell-off triggered by the spring tariffs, the U.S. stock market has continued to strengthen. Major indices such as the Dow Jones Industrial Average, the S&P 500, and the tech-heavy Nasdaq Composite Index have repeatedly reached new all-time highs this year.
Gold prices have surged throughout 2025, breaking through the $4,000 per ounce barrier for the first time. Silver, another precious metal commodity, has also climbed to $50 per ounce, setting a new post-global financial crisis record.
The simultaneous rise of stocks and gold highlights not only the divergence in traders’ views on the overall economic environment but also potentially signifies the beginning of a new wave of asset price rallies.
Multiple indicators show that the enthusiasm on Wall Street is justified. Following a 3.8% growth in the second quarter, the Atlanta Federal Reserve’s GDPNow model predicts that the U.S. economy is on track for another 3.8% expansion in the third quarter.
Despite consumers’ cautious attitudes towards the current environment, the University of Michigan Consumer Confidence Index dropped to a four-month low, but data still indicates ongoing spending.
For example, retail sales have seen a three-month consecutive increase, with August figures surpassing market expectations. According to research from the U.S. Bank, total consumer spending on credit and debit cards in September grew by 2% year-on-year.
The current labor market weakness is a primary concern for the market. With the U.S. government shutdown, key economic indicators have yet to be released. However, pre-shutdown data showed a rapid deterioration in employment conditions, prompting the Fed to implement “risk-management” rate cuts in September.
Monetary policymakers and investors are currently relying on alternative data from the private sector. ADP payroll processing company reported that private enterprises cut 32,000 positions in September.
Despite the Fed’s cautious stance on interest rate prospects, should the labor market continue to deteriorate, the institution may engage in more aggressive rate cuts.
Nevertheless, traders remain optimistic about potential rate cuts. Data from the CME Group’s FedWatch tool indicates that the futures market broadly expects another 25 basis point cut in the federal funds rate. This key policy rate directly impacts borrowing costs for businesses and consumers.
According to the Federal Open Market Committee’s latest Summary of Economic Projections released on September 17th, policymakers anticipate the median policy rate stabilizing around 3% by the end of 2027.
Furthermore, gold serves as a safe haven asset, meaning that when there is turmoil in the U.S. and global economies, investors seek refuge in gold.
The strong demand for gold from central banks around the world has become a market focus. Data from the World Gold Council shows that central banks collectively added 19 tons of gold to their reserves in August.
The Council’s latest Central Bank Gold Reserves Survey revealed that 95% of respondents expect global central bank gold reserves to continue growing in the next 12 months.
Due to substantial gold purchases by central banks in recent years, these institutions now hold gold reserves equivalent to U.S. Treasury bonds. Surveys indicate that central banks expect moderate to significant reductions in U.S. dollar holdings over the next five years, while gold holdings and other non-dollar currency assets are expected to increase during this period.
In addition to its hedging properties, gold also serves as a tool for portfolio diversification and inflation hedging.
Ultimately, as global financial markets approach 2026, the central debate may revolve around “caution” versus “speculation,” reminiscent of the dot-com bubble era.
Chris Marangi, Co-Chief Investment Officer of Gabelli Funds, highlighted the market’s focus on speculation, particularly in areas related to artificial intelligence (AI). He noted that the distinction between “good bubbles” and “bad bubbles” is being debated within the community.
Looking back at the asset booms experienced by Japan and China in the 1980s, driven by speculative activities, capital inflows, loose monetary policies of central banks, and market liberalization, significant wealth was created in various sectors, with real estate and stock markets standing out.
Could the United States be heading towards a similar investment boom?
This year, President Trump has attracted hundreds of billions of dollars in domestic manufacturing investments, from Apple’s $500 billion commitment to Merck’s $10 billion investment.
Capital expenditure (CapEx) in the world’s largest economy is also on the rise. This type of spending represents investments made by companies in acquiring, maintaining, or upgrading long-term physical assets such as equipment, technology, real estate, and buildings.
In the first half of 2025, capital expenditure increased by nearly 17%. Treasury Secretary Scott Bessent referred to it as a “resounding return of capital expenditure” and pointed out that the data indicates a “significant investment wave is forming.”
A significant portion of this investment is focused on building AI infrastructure, data centers, and manufacturing in the tech giants. Joe Tigay, Portfolio Manager of the Rational Equity Armor Fund, mentioned that the sustainability of this trend remains to be seen.
Tigay stated in an email to the newspaper that the capital expenditure momentum faced by these tech giants is real, with an unprecedented level of funding being poured into building AI infrastructure.
He added, “The real key is not whether they can exceed third-quarter earnings estimates, but whether they can present optimistic guidance for 2026 that will support this massive capital deployment cycle for another 12 to 18 months.”
Moreover, the growth of venture capital funds driven by AI and the significant increase in foreign direct investment further validate that the U.S. is experiencing an investment boom.
If this trend continues, the United States may usher in a period of long-term and widespread prosperity, encompassing both the stock and gold markets.
However, Tigay emphasized that caution is always necessary in times of prosperity, “When everyone is talking about an obvious good opportunity, that’s usually the time to be cautious.”