Why is gold looking attractive on Wall Street?

(Image credit: OsakaWayne Studios)

published 12 September 2024

“There’s a new gold rush,” says Paul La Monica in Barron’s. Not in California, but “on Wall Street”.

The yellow metal has climbed a fifth this year and recently gold hit a new record high in dollar terms. It has eased back from August's record of $2,531.70 an ounce (oz) to trade at around $2,475/oz (£1,886/oz).

How are US rate cuts helping gold?

Gold’s latest spurt came as the Federal Reserve chair Jerome Powell signalled interest rate cuts ahead. US rate cuts help gold in two ways. Firstly, gold is normally priced in dollars. Lower interest rates tend to weaken the greenback, meaning that more dollars are required to buy an ounce of gold than before. Secondly, interest-rate cuts reduce the yields available on bonds, which are gold’s main competitor as a safe-haven asset, says Étienne Goetz in Les Echos. With less competition, the yellow metal is able to shine.

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The “surge” in gold prices has been underpinned by “phenomenal appetite” from central banks – especially in countries not aligned with the US. Monetary authorities have bought more than 1,000 tonnes of gold each year for the past two years, a level of buying not seen in five decades.

What's driving the demand for gold?

Gold has no counterparty, making it “the anti-currency” and anti-banking asset of choice, Keith Weiner of Monetary Metals told Aly Yale for CBS.

When people “lose confidence in the stability of their national currencies, they turn to gold as a hedge”. Demand is being driven by deep anxieties about “debt levels, abuse of monetary policy, and either fear or desire for de-dollarisation.” With a contentious presidential election coming up, there is plenty of fear to go around. Analysts tip the metal to reach anywhere from $2,600 to $3,000 an ounce over the coming months.

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Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.