Spot gold prices closed Friday 9/20 at a new record high of $2,622 an ounce in New York, extending annual gains for the precious metal to 27.1%. It beat the weak performance of the US S&P 500 index, including dividend reinvestment. Gold is on track for its best performance since 2010, even outpacing 2020’s 25.1% gain, as the COVID-19 pandemic boosted the “safe haven” market. Gold prices have soared 811% since the turn of the millennium, surpassing the S&P’s 517% return since December 31, 1999. The latest boost to gold prices was the Federal Reserve’s decision on Wednesday (18/9) to cut interest rates for the first time in 4.5 years, which should boost the precious metal, according to conventional wisdom, as the gold prices rose 2% from Tuesday to Friday (20/7). Lower rates of return on other non-equity assets that offer fixed payments tied to Fed-set interest rates, such as short-term Treasury bonds and certificates of deposit (CDs), may make gold a more popular investment diversification option as it is considered perhaps the most popular hedge against inflation – which probably doesn’t seem to have been addressed. Which means that if US inflation worsens, gold prices will get an upward push. But it is not just US monetary policy that is boosting gold, as increased appetite for gold is linked to geopolitical risks worldwide, including from the US election and the ongoing wars between Russia and Ukraine and Israel. 
Central banks are filling the coffers
The volume of global gold purchases by central banks has tripled since Russia’s invasion of Ukraine in early 2022, according to Goldman Sachs, which also cited concerns over rising U.S. federal debt and the possibility of an institutional capital surge. in gold exchange-traded funds (ETFs) as price drivers.
The two years with the largest central bank gold purchases on record were 2022 and 2023.
China was the biggest buyer of the commodity during that period, although the People’s Bank of China declined to add to its gold holdings from May to August, ending an 18-month gold buying streak.
Gold prices typically rise in times of uncertainty as investors try to cling to the metal that has been seen as a source of value for centuries, weathering countless currency swings and crashes.
Gold, which traded as high as $255 an ounce in 2001, has seen three separate rallies since 2000, including around the 2008 financial crisis, around the COVID-19 pandemic and the period of global inflation of the past two years . The latest rally comes as most experts believe the chances of a U.S. recession are unlikely to materialize anytime soon, easing gold’s historic boost on recession fears.
