What You Need to Know About Gold’s Curious Rally
“Quiet." “Stealthy." “Surprising." Gold prices are hitting record highs, and Wall Street analysts say they have been caught off guard. The precious metal is traditionally seen as a haven in times of volatility and geopolitical risk. This time, its ascent is coinciding with investor optimism about the U.S.
economy, which has sent riskier assets like stocks to new highs. Even bitcoin has surged past its previous record. “Gold’s sharp jump to new nominal highs has surprised us in its intensity," said analysts at J.P.
Morgan Global Commodities Research on Thursday. Here’s what analysts think is going on. New highs Gold futures have notched gains for the past seven trading sessions and broken records in the past six.
Futures for March delivery settled Friday at a record $2,179 a troy ounce, bringing gold’s gains this year to 5.6%. Some triggers are easier to explain than others. The latest run-up came after a drop in consumer sentiment and moderate inflation data late last month raised hopes that the Federal Reserve will cut interest rates this year.
Lower rates make gold, which pays no income, more attractive relative to assets such as stocks and bonds that pay dividends and interest. But the magnitude of the move and gold’s climb before that call for more explanation. Gold’s biggest enemy is a rise in real yields, which are interest rates adjusted for inflation.
Yet gold has notched a 20% gain since the end of 2021. That is even as the Fed’s inflation fight has catapulted real yields to about 1.8% from around negative 1% since the end of 2021, prompting a selloff of gold exchange-traded funds in the U.S. Overseas buying Part of the explanation is a sense of growing economic and geopolitical risks outside the U.S.
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