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IN THIS CORNER, GOLD! IN THE OTHER CORNER, NASDAQ 100! LET'S GET IT ON!

Spot gold XAU= outshined the Nasdaq 100 .NDX in 2024, and although still early in 2025, that trend of outperformance is continuing. With this, gold has also been making fresh record highs in February, while the NDX's record highs, in mid-December of last year, remain intact.

According to Jessica Rabe, co-founder of DataTrek Research, gold is a static store of dollar-based value, while the Nasdaq 100 represents the economic value of human innovation.

When comparing the long-run relative price returns for gold (using the SPDR gold shares GLD.P) and the Nasdaq 100 (using the Invesco QQQ Trust QQQ.O), Rabe says:

"Human ingenuity has outperformed gold overall since 2006. The QQQs have beaten gold by an average of 5.8 percentage points over any given 1-year holding period over the last 2 decades. That’s because innovation (i.e. Tech/growth stocks in the QQQs) creates incrementally more value than the usually more static demand for a store of value (i.e. gold)."

Rabe admits that the relative returns between gold and the Nasdaq 100 have been quite choppy, but investors are more likely to put a premium on human innovation when economic and market conditions are mostly stable, such as in the 2010s bull market.

Recently, however, QQQ returns have significantly lagged those of gold. In Rabe's view, this is the result of geopolitical uncertainty, questions around AI's development costs, and demand from non-U.S. holders for the yellow metal.

Rabe's bottom line is that investors are best served owning both U.S. large cap growth stocks and gold.

"Human innovation delivers better long-term returns given its theoretically limitless potential and should therefore have a much larger portfolio allocation."

That said, she also says that "gold still has a place as a hedge in portfolios because it outperforms when humans doubt the value of their own ingenuity. Additionally, gold will always be scarce and valuable, and demand is strong."

(Terence Gabriel)

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