Gold’s latest allure? It’s sanctions-proof
Gold is having its moment. Geopolitical hedging from global central banks could keep it shining. Now at its highest level ever, above $2,400 per troy ounce, general jitters about the world alone can’t explain gold’s strength.
The yellow metal got a boost following the death of Iran’s president this week, for example, but it has been on a tear over the past two years, appreciating 33% since the end of 2022. The rally has defied some typical headwinds. Prices have surged this year even though real interest rates have also picked up: Yields on 10-year U.S.
inflation-protected Treasury securities have risen by around 0.37 percentage point in 2024. Gold typically moves in the opposite direction of real yields since it doesn’t generate any income and higher-real rates make it less attractive to hold. And, notwithstanding trends like Americans buying tiny gold bars at Costco, retail investment demand for gold also hasn’t provided much support: Gold-backed exchange-traded funds have seen net outflows for three consecutive years.
The big buyers behind gold’s rally? Global central banks, especially those in emerging markets. Central banks have added around 2,200 tons of the metal since the third quarter of 2022, according to the World Gold Council—an increase of nearly $170 billion at current prices. Central bank net purchases now account for more than a fifth of global gold demand or about twice the proportion between 2012 and 2021.
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