[MACRO Sharp Comments] Stock market weakness and gold soaring - a complete analysis of the rare divergence phenomenon in the US market

Recently, the performance of the U.S. stock market and the gold market has shown a clear trend of differentiation. The S&P 500 underperforms in 2025, while gold prices climb to an all-time high above $3,000 an ounce. This divergence not only reflects changes in market sentiment, but may also indicate the direction of the market in the coming months.

Dean Christians, senior research analyst at SentimenTrader, noted that over the past three months, the S&P 500 has underperformed gold futures by 24%, the largest gap since March 2022. Since 1970, this return gap has been below negative 24% only 5% of the time. This divergence typically reflects growing pessimism among traders and often signals a stock market bottom in the coming months, followed by a potential rebound.

Christians believes that this divergence will help determine whether the current stock market pullback is a routine adjustment in the bull market or the beginning of a shift to a bear market. Based on historical experience, when the three-month return gap between the S&P 500 index and gold futures falls below negative 24%, the outlook for the stock market in the following weeks is slightly unfavorable and may experience a repeated and volatile bottoming process. However, once the dust settles, the large-cap index has a 65% chance of rising over the next two months.

Although gold prices have hit record highs recently, there has been some volatility in the market. According to foreign media reports, gold prices fell on Monday, with spot gold falling 0.4% to $3,010.33 an ounce and U.S. gold futures falling slightly by 0.2% to $3,015.50 an ounce. The dollar index rose 0.2% to a more than two-week high, making gold priced in foreign currencies more expensive for overseas buyers. Bart Melek, head of commodity strategy at TD Securities, said the market is in a consolidation phase, in part due to a stronger dollar.

In addition, investors are also assessing U.S. President Trump's cautious stance on tariffs. Last week, Trump hinted at some flexibility on reciprocal tariffs that are about to take effect, which could have further impact on the market. Although gold prices have recently hit new highs, the market remains divided on its future trend. Haworth, senior strategist at U.S. Bank Wealth Management, believes investors should remain cautious at current levels. For the gold price to remain above $3,000 an ounce, market uncertainty needs to increase further.

In addition, investors are also assessing U.S. President Trump's cautious stance on tariffs. Last week, Trump hinted at some flexibility on reciprocal tariffs that are about to take effect, which could have further impact on the market. Although gold prices have recently hit new highs, the market remains divided on its future trend. Haworth, senior strategist at U.S. Bank Wealth Management, believes investors should remain cautious at current levels. For the gold price to remain above $3,000 an ounce, market uncertainty needs to increase further.

Despite the increased interest in gold, USBWM management is not currently prepared to invest in the precious metal. Investing in gold would only be considered if there was a persistent threat of stagflation. However, high prices will not be an obstacle. The key lies in the fundamentals of gold, that is, whether more people are willing to buy gold. Demand for gold in Asia is expected to remain strong, which could provide support for gold prices.

To sum up, the divergence between the U.S. stock market and the gold market reflects the complex changes in market sentiment. The divergence between the S&P 500 and gold futures may indicate a short-term correction in the stock market, but in the long run, the market still has some potential for a rebound. Although gold prices have hit a new high, future trends still need to focus on the development of the global economic environment and market uncertainties. Investors should remain cautious in the current market environment and focus on changes in fundamental factors to make more informed investment decisions.