“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.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
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.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
Read more
-
Annual UK rent has jumped £3,240 since Covid, says ZooplaZoopla says rental costs have risen 27% since 2021, with rental costs far outstripping wages over that period
-
The top stocks in the FTSE 100After a year of strong returns for the UK’s flagship index, which FTSE 100 stocks have posted the best performance in 2024?
-
Three gold mining stocks with strong green credentialsPersonal View Tom Bailey of HANetf highlights three gold and precious metal miners to consider.
-
Weigh up this sustainable gold ETC from the Royal MintProfessional investor Hector McNeil highlights an investment in gold, the world's oldest monetary system
-
Gold or silver: which is the better bet?Should you invest in gold or silver? Or should you own equal amounts of the precious metal?
-
Gold expands its horizons – but is it enough to drive prices?Gold is increasingly being used in industry, be it for nanotechnology, cancer therapy or fighting malaria. But is this demand enough to boost prices?
-
The end of China’s boomLike the US, China too got fat on fake money. Now, China's doom is not far away.
-
A West African empire built on goldMansa Musa the Ninth loved gold – and knew how to use it, says Dominic Frisby
-
Gold: a metal with magical powersGold is indestructible and has outlasted all other forms of money, says Dominic Frisby
-
Gold shows its mettle as a safe haven at lastNews Gold has proved its worth as a safe haven, gaining 9% since the start of the year and recently finishing its best quarter in nearly two years.
