Geopolitics, hopes of lower interest rates, and monetary uncertainty, are all helping the yellow metal.
Gold hits a fresh all-time high
I wrote about gold just last week, but I thought we should revisit the topic, because it has now hit a fresh record high.
The price almost hit £1,680 an ounce in the early hours of this morning, before easing back to £1,632 or so.
Those figures might leave you feeling a little disorientated. Gold is typically quoted in US dollars, and it hit a record high in those terms too, spiking all the way up to $2,135 per ounce in those wee small hours before slipping back to around $2,070.
It’s the US dollar price that everyone watches, and gold’s spike was, I suspect, something to do with lots of people and algorithms automatically hitting the “buy” button once it had gone above the $2,080-odd level that technical analysts have been watching like hawks.
But I thought I’d quote it in sterling to show that gold’s strength is not just a weak US dollar story. Which does rather beg the question — what is it then?
Gold Spikes Higher
The reality is that no one is entirely sure what’s driving gold higher. The obvious proximate cause — ie the short-term thing that seems to have made it jump above the record level — was Federal Reserve boss Jerome Powell not being aggressive enough in his “higher for longer” insistence on Friday. My colleague John Authers has more on that here.
Hopes of falling interest rates are certainly helpful for gold, particularly if the baseline implication is that the central bank does not have the stomach or the latitude to fight inflation aggressively.
But that in itself doesn’t explain its general resilience this year. The flipside of falling interest rates being “good” for the gold price is that rising interest rates should’ve been bad for gold, and they haven’t been (at least not to the extent that models based on “real” interest rates would imply).
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