Why is the price of gold increasing?

The Eagles DESTROYED the Chiefs in a disappointing, boring game for most viewers. Honestly though, the ads were the worst part. There were maybe two memorable ones. Coinbase’s bouncing QR code from 2022 is still an undefeated ad for creativity and simplicity. Maybe one day we will return to greatness, but just like Patrick Mahomes, Sunday was not that day.

Generally speaking, gold and the stock market are inversely correlated, meaning as the stock market decreases in value, gold increases in value.

Gold is a finite resource. The earth isn’t making more of it, and we haven’t found a cheap way to produce it in a lab like diamonds. So, when things are looking rough in make-believe stock market land, investors turn to something physical and real. Gold and Yankee Candles. 

Additionally, because gold is finite, it is a hedge against inflation. As paper currency loses value from inflation, gold retains value. Here is a fun example that I found:

An ounce of gold should always be able to buy you a new suit. In 1950, a suit cost around $45 dollars (according to Google AI) and an ounce of gold was $40. In 2025, a quality, tailored suit would cost you around $2,500 (widely depending on where you go) and an ounce of gold currently is $2,900. 

I wonder if this means suits are also inflation hedges… 

So, why are gold and the stock market moving together now? Basically, the conditions are ripe for the value of gold to increase: high inflation and an uncertain economic landscape. The stock market’s performance under these conditions and higher-than-0 interest rates has surprised even the most bullish of analysts. Investors turned to gold because of the high inflation and kept turning to gold while they waited for a market correction. 

Additionally, central banks, who also need to hedge against inflation, have been buying gold in massive quantities, increasing demand. Like Dwight Schrute says, “money isn’t real ever since we got off the gold standard.” With nothing physical attached to their currency, countries are scrambling to get real value behind their imaginary money.

To wrap it up, the price of gold generally follows inflation and increases during periods of economic uncertainty. The stock market tends to fall during high inflation (due to monetary policy weighing it down) and economic uncertainty builds prior to a recession or correction. 

The price of gold has performed as history would expect, high inflation = higher gold prices. The stock market has performed NOT as history would expect. So the real question is not why is gold increasing, but why is the stock market still rising? 

What does Costco have to do with this? 

In 2023, Costco announced it would start selling gold bars. Demand was and is hot with a capital H. Wells Fargo estimates Costco is moving $200 MILLION in gold EACH MONTH. Is this enough to significantly change the price of gold? I don’t know, but wow that is a lot of gold.

Debrief on Deck

Next week, we will talk about why people lease cars and the economics behind it.

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Until then, stay the course.

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