What’s Driving the Gold Rally?

Gold Rush

The prices of various precious metals – including gold, silver, and palladium – have surged recently.

Gold hit a new all-time high of more than $2,150 per ounce this week, after its price rose nearly 5% in the past five trading days. Over the same period, the price of an ounce of silver rose from around $22 to more than $24, while the price of palladium increased from under $940 per ounce to more than $1,000.

Price Increases

So what’s going on? A lot, frankly.

Precious metals, particularly gold, are often seen as a safe haven investment that investors put money into during times of uncertainty. That’s how geopolitical conflicts, or economic woes, can play a role in the price of metals.

The inherent value to gold also makes it what investors might call a “store of value”. Over the long term, few assets have maintained their purchasing power the way gold has. For some investors that can make it a compelling investment during times of inflation.

And then there’s the Federal Reserve. It increasingly looks like the market will have to wait a little longer for the first interest rate cuts from the central bank. Generally speaking, high interest rates increase the potential returns for certain asset classes, and that can weigh on the price of gold. While the market has tempered expectations of rate cuts since the start of the year, Fed Chair Jerome Powell maintained he still expects the central bank to cut rates in 2024 during his semiannual testimony before Congress.

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