A gold rush is here, with the precious metal hitting an all-time high this week. The spot price for gold closed Tuesday above $2,514 per Troy ounce, the highest closing price recorded for the commodity to date. The standard for measuring precious metals, a Troy ounce is equivalent to 31 grams, which means a gold bar or brick weighing 400 Troy ounces is worth more than $1 million today.
This week’s record high indicates that the price of gold has surged hundreds of dollars per Troy ounce over the past year. Tuesday’s price reflects an increase of nearly $620 from this time in 2023.
Several factors contribute to the recent gains. Interest in buying gold typically spikes during times of uncertainty—concerns about inflation and the strength of the U.S. dollar often lead investors to seek alternative places to park their money. The early days of the COVID-19 pandemic also saw a surge in gold interest.
According to Giovanni Staunovo, a commodity analyst at UBS Global Wealth Management, the main drivers of recent gold gains have been the weaker U.S. dollar and expectations that the Federal Reserve will cut its benchmark interest rate next month. With particular concern on the health of the job market, all eyes are on a Friday speech from Fed Chair Jerome Powell in Jackson Hole, Wyoming.
Strong demand from central banks, currently well above the five-year average, is another factor, notes Joe Cavatoni, senior market strategist at the World Gold Council. This heightened demand reflects increased concern about inflation and economic stability. Geopolitical tensions, such as the wars in Ukraine and Gaza, have notably fueled global uncertainty and bolstered gold purchases. Numerous countries, including the United States, are also navigating a tumultuous election year, which could significantly impact future economic policies.
Advocates of investing in gold consider it a “safe haven,” arguing that the commodity can diversify and balance an investment portfolio while mitigating possible risks over time. Some investors find comfort in buying tangible assets that have the potential to increase in value. Staunovo’s team at UBS forecasts that the price of gold will reach $2,600 by the end of this year and $2,700 by mid-2025, anticipating that lower U.S. interest rates and a weaker dollar will support inflows into gold ETFs (exchange-traded funds), boosting investment demand.
However, future gains are never guaranteed, and not everyone agrees that gold is a sound investment. Critics argue that gold isn’t always the effective inflation hedge it is purported to be and that there are more efficient ways to protect against potential capital loss, such as derivative-based investments. The Commodity Futures Trade Commission has previously warned about the volatility of precious metals and the risk associated with investing in them. Prices rise as demand increases, meaning that during periods of high economic anxiety or instability, the primary beneficiaries are often the sellers rather than the investors.
For those who choose to invest in gold, the commission advises educating oneself on safe trading practices and remaining vigilant against potential scams and counterfeits in the market.