Gold's bear market is bullish for stocks: Morgan Stanley
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- Gold tumbled into bear market territory on Monday, down as much as 23% from its closing high, with Nymex futures falling 10% in a single session to around $4,100/oz.
- President Trump triggered a market rebound with a Truth Social post about "good and productive conversations with Iran," after which stocks rose, Treasury yields fell, and gold recovered some of its early losses.
- Morgan Stanley's Mike Wilson cited two causes of the selloff: speculative inflows into gold ETFs being flushed out by wobbly markets, and governments potentially selling gold reserves to cover higher oil/commodity costs and citizen subsidies.
- Wilson uses the S&P 500-to-gold ratio as a key sentiment gauge, noting it has surged 12% since the Iran conflict began three weeks ago — which he says shows markets aren't complacent about geopolitical risks.
- The S&P 500-to-gold ratio has historically bottomed when the U.S. commits more forcefully to a major military conflict, Wilson observed, asking whether the same pattern is now playing out.
- The S&P 500 has fallen 6.8% from record highs recently, with oil trading around $89/barrel on Monday as the U.S.-Israel conflict with Iran continues.
Why it matters: Wilson's contrarian thesis carries real positioning implications: if the S&P 500-to-gold ratio keeps recovering as Trump's Iran diplomacy advances, it would suggest the equity market's 6.8% pullback from record highs overdiscounted geopolitical risk and could set up a stock rebound. Gold holders, by contrast, have already absorbed a 23% drawdown on a metal they bought as a haven.
