CNA Explains: Why did gold and global markets hit all-time highs at the same time?

, the price of gold has continued to surge in 2024, hitting new highs and trading at more than US$2,100 an ounce since early March.Japan's Nikkei reached levels not seen since 1989 in February before crossing the 40,000 mark on Mar 4. The United States' Dow Jones Industrial Average, meanwhile, has also been setting new records, closing above 39,000 for the first time on Feb 22 and hovering around that level since then.

"This latest rally in gold price over the past month is unique in that gold is trading higher alongside other risky assets like equities," said UOB's head of markets strategy Heng Koon How. Mr Menon said it is"interesting" that global equities have continued to post strong gains although rate cut expectations have been pared back sharply from a projection of seven to eight rate cuts at the start of the year to about three currently.

"The precious metal's outlook becomes more positive when interest rates fall because gold offers zero yield – it does not pay dividends or regular income to investors – and will look more appealing when rates fall," he said."Positive corporate earnings and optimism surrounding rate cuts and artificial intelligence as the next sustainable investment theme have driven stock markets to record highs," it said.

"Emerging markets central banks have been especially aggressive with gold buying after the US weaponised the US dollar in its sanctions against Russia for its invasion of Ukraine," he added."Consumers, through jewellery purchases, and other investors have also piled into gold resulting in total gold demand surging to a record high of 4,899 tonnes last year," Mr Menon said.

The fact that both equities and gold are rising"indicates that investors are hedging their bets", he added. "Hence, even though stock prices have surged, investors and central banks have also been buying gold to diversify their portfolios and protect them against global risks."Mr Menon highlighted two periods of time in the last 15 years where gold and stocks both did well at the same time.

Another period where stocks and gold both did well was in 2020 and 2021, after the onset of the COVID-19 pandemic. Mr Menon said that, overall, OCBC remains"constructive about the investment outlook for 2024, assuming US core inflation falls and the US economy avoids a hard landing as the US central bank cuts rates".

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