Up 48% in 2025, Can Gold Continue to Crush the S&P 500 in 2026?

Core Viewpoint - Gold has surpassed $4,000 per ounce as of October 6, marking a significant increase from below $2,000 two years ago, which is unexpected given its historical underperformance compared to the S&P 500 during bull markets [1][3] Group 1: Gold's Performance - Gold has outperformed the S&P 500 year to date and over the last three years, despite the S&P 500's strong returns over the past 15 years [3][4] - Year-to-date returns for gold are 48.1%, while the S&P 500 has returned 15.3% [5] Group 2: Factors Driving Gold Prices - Currency risk is a major factor driving gold prices higher, with central banks in countries like China and India increasing gold's share in their reserves [5][6] - Countries are diversifying their reserve portfolios to hedge against economic instability and geopolitical tensions, reducing reliance on the U.S. dollar [6][8] - The U.S. dollar's value fell by 11% relative to a basket of currencies in the first half of 2025, prompting allies like Japan to increase gold reserves [8] Group 3: Central Bank Activity - Central banks are significantly increasing their gold reserves, with notable increases from China, India, Japan, Turkey, and Poland over the last five years [9] - The U.S. holds the largest gold reserves, but these have remained unchanged for years, contrasting with the increasing reserves in other countries [9]