Gold recently broke a price record, soaring above $2,100 an ounce in March.
Despite the rally, gold is still no match for equities. As the chart below shows, gold has largely underperformed stocks historically, with occasional, short bursts of success.
From 1970-2023, the S&P 500 has averaged annual returns of 10.6%, with gold at 7.5%.
Gold has earned a reputation as an inflation hedge. However, stocks are likely to better serve that same purpose once risk is accounted for. Stocks are more liquid assets and are positively impacted by real economic growth.
Regardless of which asset class is better, the recent gold rally and continued positive performance of stocks do offer some insights into inflation. The higher move from both lends further credence to the fact that inflation might be sticky. For reference, the February PCI increased at a 2.5% annual rate, compared to 2.4% a month prior. Higher prices might stick around.
Source: Aaron Back, WSJ; Reuters
Reade Ben is a policy analyst at the Manhattan Institute.
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