Another Warning Signal Flashes: S&P 500/Gold Ratio Reaches The Lowest In Years

Recently, the ratio of the S&P 500 Index to gold has fallen to its lowest level since the COVID-19 pandemic. This trend highlights investors' growing preference for safe-haven assets while also sounding an alarm for the U.S. and global economy.

Global Head of Gold Strategy at state street Global Advisors, the sharp decline in the S&P 500-to-gold ratio in March does not necessarily signal an impending economic recession. However, he noted, this "reflect increased investor demand for safe-haven assets such as gold, and a potential reassessment of U.S. growth exceptionalism and corporate earnings optimism."

Doshi's recent analysis shows that the average S&P 500-to-gold ratio in March dropped to around 1.9x, meaning it takes 1.9 ounces of gold to buy the S&P 500 Index. This is significantly lower than the 2.3x recorded in December 2024 and the cyclical peak of 2.5x in February last year.

As of Tuesday, April gold futures on the COMEX settled at $3,025.90 per ounce, up $10.30 (0.3%). Gold prices have been rising steadily this year, hitting a record high of $3,043.80 per ounce on March 20. Meanwhile, the S&P 500 Index edged down to 5,765.94 points on Tuesday, showing an overall downtrend in 2025.

Dean Christians, a senior analyst at SentimenTrader, pointed out that gold has significantly outperformed U.S. equities this year, with the three-month return gap between the two assets reaching its widest in over two years.

Doshi emphasized, "Traders are seeking hedges against perceived economic and geopolitical risks," He further explained that heightened policy uncertainty in the U.S., both domestically and internationally, has weakened consumer confidence, potentially dampening business investment while inflation expectations persist. Data from the Conference Board on Tuesday showed the U.S. Consumer Confidence Index fell to 92.9 in March, the lowest in over four years, down from 100.1 in February.

However, Doshi cautioned that it remains unclear whether the recent movement in the S&P 500-to-gold ratio is a genuine economic warning or merely short-term portfolio rebalancing. It's too early to determine if this decline has structural implications, he said.

That said, he noted that the ratio has rebounded slightly from its March lows as the first quarter draws to a close. This could indicate investors are reducing exposure to U.S. equities and leverage while increasing allocations to lower-volatility assets like gold—suggesting the trend may partly reflect positioning adjustments and capital reallocation.

Additionally, Doshi highlighted that spot gold prices have surged about 15% this year to record highs above $3,000 per ounce, driven by both physical demand and financial market factors. Post-pandemic gold demand recovery in China's retail market and continued central bank purchases in emerging markets have provided structural support. The most critical driver, however, has been renewed inflows into gold ETFs. Western investors, after a 3.5-year destocking cycle, have returned to gold ETFs in force this year, further bolstering prices.

Doshi concluded that the recent underperformance of U.S. equities relative to gold is a noteworthy development, and he will continue monitoring how this trend influences future market dynamics.