Gold $4000 Isn’t Foretelling Much

Earlier this week, gold surpassed $4,000 per ounce for the first time. While some gold bugs are cheering, others are less enthusiastic, arguing the milestone signals heightened market risks and a broader move away from the US dollar. We doubt it. Over time, gold’s moves don’t align with any of the conventional “wisdom” about it, which tells you spiking gold isn’t inherently bearish or a sign of anything ahead. Rather, all the chatter about its alleged foreboding illustrates lingering investor skepticism, suggesting this bull market likely isn’t at a euphoric top.

The bearish story goes like this: Supposedly, gold reaching new highs signals investors and central banks’ preferring the shiny metal over the US dollar and Treasurys as a safe haven. Also, citing the greenback’s depreciation against other major currencies this year, some argue investors are losing faith in the dollar tied to political and legislative risks. In concert, they suggest these trends indicate nascent trouble for other US assets, like stocks. Fun pundits have dubbed it, the “debasement trade.”

Oddly, some say gold’s rise signals trouble for all major currencies, seemingly forgetting they trade in pairs and can’t all weaken simultaneously. This illogic is your first obvious signal this is a false fear.

Yet plenty more reasons abound. For one, there just isn’t strong evidence people are abandoning the dollar and dollar-based assets the way many claim. Historically speaking, the dollar isn’t that weak. Nor are US Treasury yields sky high, which many associate with rising risk. Exhibits 1 and 2 show this, charting the US dollar’s value versus broad and “major” trade-weighted currency baskets and long-term Treasury yields since 1975.

Exhibit 1: US Dollar’s Minor Weakening

Source: FactSet, as of 10/8/2025. Nominal trade-weighted US dollar index (broad and major), monthly, 12/31/1974 – 9/30/2025.

Exhibit 2: Treasury Yields Aren’t Sky-High

Source: FactSet, as of 10/8/2025. 30-Year and 10-Year Treasury yield, constant maturity, daily, 12/31/1974 – 10/7/2025. Note: The US government reintroduced 30-year bonds in 1977, so there is no data from 1975 – 1976.

Yes, the dollar is down this year. But it has been strengthening since this past July’s low, to little or no applause. And it is still up nicely this century, floating near its 2015 and 2024 levels—two periods in which “strong dollar” fears painted headlines. Treasury yields, on the other hand, are down year to date and well below levels seen in the 1970s and 1980s. This doesn’t scream “major exodus” to us. In reality, it is the opposite—as we covered last month, Treasury demand remains alive and well stateside and abroad.

Meanwhile, US stocks are up 16.0% year to date.^[i] And lest you think that is just the so-called Magnificent 7—US small caps are up 12.6% while the equal-weighted S&P 500 is up 10.6%.^[ii] Generally speaking, if there is a broad flight from a country’s markets, you don’t get positive returns.

Nor is it likely gold knows something stocks don’t, which is the core argument at hand. All similarly liquid assets digest information more or less simultaneously, in our experience, so gold is exceedingly unlikely to signal a flight to quality stocks somehow forgot to register. Markets just don’t work like that.

It also isn’t really so rare for stocks and gold to rise together … as they largely have since 2022. (This isn’t new, folks.) If the claims rising gold signals doom for stocks were true, the two should have a strong negative correlation, with gold continuing to rise as stocks eventually register those alleged problems. In statistical terms, this implies a -1.00 correlation coefficient. The opposite, a 1.00, implies a strong positive correlation (the two rise in lockstep). Exhibit 3 explores this relationship, charting the rolling 52-week correlation between US stocks and gold prices. This tells you how strong the relationship was over the preceding year.

Exhibit 3: Gold and Stocks’ Non-Relationship

Source: FactSet, as of 10/8/2025. Rolling 52-week correlation between weekly price changes in gold and S&P 500, 12/31/1999 – 10/7/2025.

As you can see, their correlation bounced roughly between -0.40 and 0.40 over the past 25 years. That means sometimes, gold and stocks had a weak-but-positive correlation, moving together. Other times, they moved in opposite directions. Regardless, the trends were so short-lived as to be almost meaningless, with points of strong negative (and positive) correlation few and far between and occurring during stock bull and bear markets.

Longer term, this nets out to a 0.04 correlation over this entire stretch.^[iii] Functionally, that means no relationship. Gold can’t both signal something fundamentally important for stocks and have no relationship with their returns. Arguing otherwise is simply illogical.

All that aside, these worries smell like lingering skepticism to us. Interestingly, they come as pundits ramp up talk around euphoric sentiment and a potential market bubble. Things like AI’s role in economic growth, high stock valuations and other supposed “toppy” signs have some concerned a rerun of the 2000s dot-com crash is coming.

We aren’t convinced, mind you, and we think today’s skepticism illuminates one reason why. Euphoria and market bubbles happen when sentiment runs so hot people overlook underlying economic weakness. Like in the Tech bubble, when skyrocketing valuations diverted eyeballs from deteriorating company fundamentals. Conversely, bubbles don’t happen when folks broadly latch onto bearish narratives with no factual basis—as is the case today. That is more what you classically see in a bull market wall of worry, which tells us this one has room to run.