Gold’s record run: Can it keep rising forever?

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Subscribe to enjoy similar stories. Gold is what you buy when everything isn’t goldilocks. Inflation, deflation, war, pestilence—gold is a certain anxious state of mind made tangible in a seductive but mostly useless metal.

In a weird spin, gold has been enjoying a goldilocks period itself, hitting a new record last week. More than that, it seems almost immune to things that would usually drag it down. Almost.

Gold’s investment case tends to morph over time, but is often framed in relative terms: Gold versus stocks, the dollar, bitcoin, or whatever. The one that makes intuitive sense is gold’s relationship with real US Treasury bond yields: When the latter are positive or rising, gold, which yields nothing, should suffer and vice-versa. This relationship broke in 2022.

A multifactor model of gold prices maintained by Longview Economics, a London-based analysis firm, diverged sharply from the market price of gold in 2022 after tracking it closely since 2008. By early 2024, the model indicated a price below $1,000 per ounce whereas gold was then trading at more than $2,000. Similarly, physically-backed gold exchange-traded funds began liquidating their stockpiles in earnest in mid-2022, likely taking their cue from the US Federal Reserve’s policy tightening.

But that barely weighed on prices and then gold actually rallied even as ETF liquidation continued. Gold was saved by central banks stepping into the breach. Russia’s new invasion of Ukraine in 2022 sparked sanctions by the US and its allies, prompting a wave of gold stockpiling by central banks as a geopolitical hedge and in order to diversify reserves away from the dollar.