Gold marked a new all-time high this Monday, reaching above $2,100 per ounce in early trading. The gold metal, considered a safe haven asset in times of uncertainty, thus exceeds its previous all-time high of $2,063, which it reached in August 2020, in the midst of the pandemic.
This latest rebound is explained by growing expectations of cuts in official US interest rates at the beginning of next year. An optimism that has driven bullion upwards since October and that accelerated on Friday after the president of the Federal Reserve, Jerome Powell, stated that the rapid cycle of increases undertaken by the central bank has had effects on economic activity and which, therefore, will act “with caution” in its next meetings.
Although Powell later attempted to counter market optimism about a rate cut by warning that “it would be premature to confidently conclude that we have achieved a sufficiently restrictive stance,” swap markets expect a rate cut next March. . A cut that they are already beginning to discount. In addition to the expectation of an almost imminent drop in rates, the price increase is also due to the avalanche of purchase orders that occurred after the Hamas attack in Israel on October 7.
Since the low it marked at the beginning of that month, the price of bullion has risen around 15%. An increase that coincides with the fall in the yield of the 10-year US Treasury bonds and with the rise experienced in the shares of miners such as Newmont, Northern Star Resources and Zijin Mining.
The precious metal is trading at a considerable premium to its price models based on its historical relationship with the dollar and Treasuries. That dynamic has persisted for most of the past year, fueled by record purchases by central banks, which helped bullion weather persistent outflows from gold-backed exchange-traded funds.
ETF holdings have fallen sharply since late May, but have shown signs of stabilizing since mid-October. However, they fell last week after a streak of five weekly gains.
