U.S. stocks and gold hit new highs together, what does the market's "division" reveal?

The global market is experiencing a rare "split," with investors frantically chasing risk assets while desperately hoarding safe-haven tools, as both the S&P 500 index and gold approach historical highs.

Traditionally, there is a certain degree of negative correlation between the S&P 500 index and gold. When the stock market hits new highs, it usually indicates that investors are optimistic about the future and willing to invest in risk assets; meanwhile, gold, as a safe haven, tends to be favored during periods of uncertainty.

However, as of Monday, gold has risen nearly 27% this year, just 2.1% away from the historical high set on April 21.

In contrast, the S&P 500 index has only increased by 2.1% this year but has strongly rebounded from the significant sell-off following President Trump's announcement of comprehensive tariff measures on April 2. As of last Friday, the index was about 2.3% away from the historical closing record set on February 19.

Notably, on February 18 of this year, both the S&P 500 index and gold futures reached their respective historical highs— the index closed at 6129.58 points, and gold closed at $2949.

The Driving Forces Behind: Coexisting Optimism and Fear

Regarding this unusual trend, Adam Koos, president and senior financial advisor of Libertas Wealth Management Group, pointed out succinctly,

It's like watching someone eat both salad and dessert at the same time; investors are trying to stay healthy while still hedging against potential outcomes.

The current market tells a story of "conflicting narratives." Koos explained:

The stock market is pricing in a soft landing under AI-driven profit growth, while gold is pricing in long-term structural concerns, including runaway deficits, a weakening dollar, and even central banks' demand to hedge against U.S. risk exposure.

Keith Weiner, CEO of Monetary Metals, analyzed:

Stocks often react to growth-related factors such as earnings and interest rates, while gold prices are typically driven by fear-related factors like inflation expectations or debt levels. Currently, both sets of driving forces seem to be at "high levels." Optimism is pushing the stock market higher, while underlying fears are supporting record demand for gold. Investors are "seeking growth by continuing to buy stocks and seeking stability by purchasing gold, positioning for two potential outcomes."

Gold/S&P 500 "High but Not Extreme"

Dina Ting, head of global index portfolio management at Franklin Templeton, noted that the ratio of gold to the S&P 500 is "high but not at extreme" levels. This ratio represents how many ounces of gold are needed to purchase the index.

Currently, this ratio is about 1.76, favoring gold. Koos stated:

In April of this year, the ratio fell to about 1.5. When the ratio declines, gold tends to perform relatively better, which may indicate that investors are "turning to safe assets or preparing for volatility." When the ratio rises, the bulls, momentum, and strength are in the hands of the S&P 500 index.

Although rare, the index and gold may once again reach historical highs simultaneously. However, Koos warns that maintaining this situation may require a combination of multiple conditions, such as a decline in real interest rates or a dovish Federal Reserve policy, sustained demand for hard assets, ongoing confidence in long-term growth, and "enough macro uncertainty to keep fear trading active."

Koos likens this situation to "watching someone balance two spinning plates," which may be maintained for a while, but "requires continuous movement and the right conditions to prevent both from falling."