ROI-Why gold beat the Dow in a milestone race: Marty Fridson

Financial markets recently reached two milestones. On January ​26, gold hit $5,000 an ounce for the first time, and eleven days later, the Dow Jones Industrial Average cracked ​50,000. Bullion got to its mark first – and that wasn’t supposed to ‌happen. Imagine ​if a prediction market in December 2020 had offered a proposition bet on which historic breakthrough would happen first. At that point, the Dow was already 61% of the way toward its big round number, while gold was just 37% of the way there.

Extrapolating data trends from 1985 through 2020, you would have expected the Dow to reach 50,000 by 2027 ‌and gold not to hit the $5,000 target until 2035. But gold's trajectory took an astonishingly sharp upturn in the last five years. Its price doubled between 2022 and 2024 alone. That surge helped the precious metal beat the stock index by what essentially amounts to a photo finish.

WHEN TRENDLINES FAIL So why did the trendlines fail to predict the outcome?

In the case of the Dow, the index picked up speed in recent years as capital poured into U.S. markets after the pandemic, but this surge was nothing compared to ‌the rapid spike in the yellow metal. Analysts have offered several explanations for the dramatic acceleration in gold's gains. One underlying factor is geopolitical instability. Historically, turmoil tends to heighten demand for safe-haven assets. And there have been plenty of reasons to ‌worry in recent years, including the now four-year-old Russia-Ukraine war, conflicts in the Middle East, and U.S. President Donald Trump's tariff drama as well as his vow to gain control over Greenland. Inflationary anxieties have further bolstered gold’s appeal, stoked by what many observers see as Trump’s efforts to step up political influence over the Federal Reserve. The president has long called for much lower interest rates. His nomination of Kevin Warsh, a previous proponent of tighter monetary policy, as the next Fed chair quelled those fears somewhat at the end of January, causing gold to back off from its January 28 peak. But it remains ⁠above the $5,000 per ​ounce threshold. Meanwhile, worries about a potential pickup in inflation have undermined confidence ⁠in the dollar. In response, a number of nations’ central banks have stepped up their purchases of gold in lieu of the U.S. currency.

China’s central bank certainly moved in that direction, and its households and investors also helped drive the rally. The World Gold Council reported a 28% year-over-year increase in ⁠the population’s purchases of gold bars and coins in 2025. Chinese gold ETFs have also enjoyed record inflows over the last year. In short, the Dow’s rise appears to have been an acceleration of existing trends, while gold’s extreme surge was dependent on many exogenous factors and a ​bit of speculation – which obviously can’t be predicted beforehand.

THE SEDUCTION OF ROUND NUMBERS Ultimately, though, does reaching these financial milestones truly matter? The achievements occasioned some predictable claims from analysts and the financial press. These assets crossed "critical" psychological thresholds, ⁠some argued, with the suggestion that doing so could generate momentum in that direction.

But even if big round numbers like $5,000 or $50,000 have some psychological impact on investors, it's likely to be fleeting. Consider what happened after the Dow reached previous “psychologically important” thresholds: 1,000 (November 14, 1972), 5,000 (November 21, 1995), 10,000 (March 29, 1999), and 25,000 (January 4, 2018).

In two ⁠cases, ​the Dow rose over the next 12 months by double digits, but it fell in the other two. Whatever warm feeling arises from seeing a commodity or index clear a seemingly significant new level can thus fade quickly once new market-moving information arrives. One may argue that the rise of passive investing and factor-based trading could amplify any positive momentum garnered from breaking through a big round milestone – but the recent moves in gold suggest that this is not necessarily the case.

The lesson to draw ⁠from all of this is that investors would be wise to avoid relying too heavily on either the extrapolation of past price trends or the lasting effect from the latest headline-grabbing market achievements. Milestones make for great copy, but shaky strategy.

(The ⁠views expressed here are those of Marty Fridson, the publisher of Income ⁠Securities Advisor. He is a past governor of the CFA Institute, consultant to the Federal Reserve Board of Governors, and Special Assistant to the Director for Deferred Compensation, Office of Management and the Budget, The City of New York.) Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI on LinkedIn and X. And listen to ‌the Morning Bid daily podcast on ‌Apple, Spotify, or the Reuters app. Subscribe to hear Reuters journalists discuss the biggest news in markets and finance seven days a week.

(Writing ​by Mart Fridson; Editing by Anna Szymanski and Marguerita Choy)