Gold vs. S&P500: Where is the smart money going?
By Paul Reid
Gold just hit $3,115 — a record high — while the S&P 500 hovers near all-time highs too. Both are strong, but they’re telling different stories.
Gold’s breakout comes amid rising trade tensions and global instability. Trump’s new tariffs have traders rushing for havens. Gold thrives in this kind of chaos: central bank demand, inflation fears, and geopolitical drama all fuel the rally. Meanwhile, big banks like Goldman Sachs are raising gold price targets — some even see $3,300 by year-end.
The S&P 500, on the other hand, is defying the fear. Even with the Fed warning of “uncertainty” (a word Powell used 22 times in one speech), US equities keep climbing. Why? Solid consumer demand, strong corporate earnings, and the hope that the Fed might still cut rates this year.
XAUUSD technical outlook: Gold’s record run faces critical tests
Gold’s ascent to $3,100+ has captivated markets, but traders are now weighing whether the rally can sustain momentum or succumb to profit-taking. The technical landscape reveals a bullish narrative tempered by risks of short-term corrections.
The bullish case: Structural strength
Gold’s price action remains anchored in a multi-year uptrend, with the current surge aligning with a Wave 3 impulse in Elliott Wave theory. This phase often delivers the most aggressive gains, and analysts argue the metal could target $3,200–$3,300 by mid-2025 if bullish momentum holds.
Key technical signals reinforce optimism:
- Price Action: A hammer reversal on the H4 chart (March 27) confirmed bullish resolve, while the ascending channel remains intact. Prices are testing $3,080, a level that, if breached, could unlock a sprint toward $3,100.
- RSI Dynamics: Despite overbought conditions, the Relative Strength Index shows a bullish divergence, suggesting underlying strength.
- Support Zones: The $3,057–$3,063 range has emerged as critical support, with dips here attracting buyers. A close above $3,100 would validate the breakout and signal a path to $3,200.
Bearish risks: Overextension and macro headwinds
While gold’s fundamentals appear robust, technicals warn of potential overextension. A failure to hold $3,077 could trigger a pullback to $3,010–$3,035, with deeper corrections targeting $2,970–$3,000 if sentiment shifts.
The 61.8% Fibonacci retracement level at $3,010 looms as a key floor. A breach here would signal a loss of momentum, potentially aligning with broader risk-off moves in equities or a dovish Fed pivot.
Strategic considerations
Traders eyeing long positions should focus on dips near $3,063–$3,077, placing stops below $3,057 to mitigate downside risk. Partial profit-taking at $3,080–$3,100 is prudent, but holding for $3,200+ remains viable if momentum persists.
Conversely, bears might seek reversal patterns (e.g., bearish engulfing candles) at all-time highs to capitalize on overbought conditions.
The bigger picture
Gold’s trajectory hinges on macro catalysts:
- Tariff Escalation: Trump’s April 2 reciprocal tariffs could amplify safe-haven demand, pushing prices higher.
- Fed Policy: Delayed rate cuts or hawkish rhetoric might pressure gold, though inflationary pressures from tariffs could offset this.
- Central Bank Buying: Structural demand from institutions diversifying reserves remains a tailwind.
While the path to $3,500+ is plausible, traders should remain agile. A 3% portfolio allocation to gold—paired with equities and bonds—could balance risk amid volatility.
In short, gold’s rally is not yet exhausted, but discipline is key. Buy the dips, respect support levels, and stay alert to geopolitical shifts.
S&P 500 technical outlook: A critical crossroads amid tariff turbulence
The S&P 500 is perched precariously near 5,500, a psychological and technical support level that could determine whether the index stabilizes or extends its recent slide. With markets bracing for President Trump’s April 2 tariff announcements, the path ahead hinges on whether buyers can defend this critical floor—or if sellers will dominate, accelerating a deeper correction.
Bearish structural weakness
The S&P 500’s recent breakdown from a bearish flag pattern has amplified fears of a prolonged downturn. Technical analysts argue this violation signals a continuation of the 10% correction from February’s all-time highs, with a potential 20% total decline (targeting 4,900–4,800) by late 2025. The index now trades 9% below its 200-day moving average, a stark reversal from its earlier bullish trajectory.
Volume patterns reinforce the bearish case: the S&P has lost ground in five of the past six weeks, with persistent selling pressure eroding confidence. Macro risks loom large, particularly Trump’s “Liberation Day” tariffs, which threaten to stoke inflation and slow economic growth. A weak March jobs report or manufacturing data this week could further destabilize sentiment.
Oversold conditions
While the technical outlook leans bearish, the S&P 500’s RSI near 30 on daily charts suggests the index is oversold, potentially setting the stage for a short-term rebound. Should buyers defend 5,500, a relief rally toward 5,759 (the 200-day MA) or even 5,900 (the 50-day MA) could materialize. However, reclaiming these levels would require a decisive shift in momentum—a tall order given the macro headwinds.
Institutional optimism persists, with analysts like RBC Capital’s Lori Calvasina maintaining a 6,200 year-end target, contingent on the S&P avoiding new lows. Yet, such bullish forecasts feel increasingly disconnected from the current reality of tariff-driven volatility and slowing corporate earnings.
Strategic considerations
Traders eyeing short-term opportunities should watch for a bounce near 5,500, but with tight stops below 5,485 to mitigate downside risk. A breakdown below this level would likely accelerate selling, targeting 5,385—a zone that could spark panic among retail investors. Conversely, long-term investors might view a drop to 4,900–4,800 (a 20% correction) as a high-conviction buying zone, akin to the COVID-era lows.
For now, the path of least resistance remains downward. Aggressive long bets are ill-advised until the S&P reclaims 5,759 or shows sustained buying volume—a scenario that seems unlikely without clarity on tariffs or a dovish Fed pivot.
The bigger picture
The S&P 500’s trajectory this week will hinge on tariff outcomes and economic data. A decisive break below 5,500 would signal a structural shift toward bearish momentum, while holding this level could set the stage for a relief rally. However, with markets pricing in higher-than-expected tariff rates and geopolitical tensions simmering, volatility is likely to persist.
In short, the S&P 500 stands at a crossroads. Will buyers defend 5,500, or will sellers dominate, ushering in a deeper correction? For now, caution is warranted.
So which asset wins?
If the world continues down a path of fragmentation and inflation — gold likely stays hot. But if we see a surprise shift to trade deals and calmer headlines, equities may steal the spotlight.
Watch the data. This week alone we get US NFP, PMI readings, Powell speeches, and Trump’s so-called reciprocal tariffs. It’s a packed macro calendar, and it will push money one way or the other.
For traders, this isn’t about picking sides — it’s about staying agile. Volatility creates opportunity. Whether you’re long gold or the S&P, or trading both, always use proper risk management.
Want to test your gold vs. S&P strategy without risking capital? Try it on the Exness demo account. Follow the moves, watch the headlines, and sharpen your edge.
For more macro analysis, real-time breakdowns, and trading insights, visit the Exness blog homepage. We decode the market narrative every week so you don’t miss a beat.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Author:
Paul Reid
Paul Reid is a financial journalist dedicated to uncovering hidden fundamental connections that can give traders an advantage. Focusing primarily on the stock market, Paul's instincts for identifying major company shifts is well established from following the financial markets for over a decade.