The ounce of gold, the safe haven par excellence, broke its historic record on Monday, rising 1.5% to $2,265 in a context marked by PCE inflation in the United States and the declarations of the President of the Reserve (Fed), Jerome Powell, in which he stressed that the disinflation process must be consolidated before the first drop in interest rates.
According to market data consulted by Europa Press, the ounce of gold reached this new historic record around 6:00 a.m. Spanish time, even if at midday the rise in the precious metal had moderated to 1.1%, at $2,254.
This movement in the price of gold comes after it was learned last Friday that US PCE inflation – one of the macroeconomic benchmarks most followed by the Fed when evaluating its monetary policy – increased in February tenth of a percentage point to 2.5%, while core inflation moderated by another tenth of a percentage point to 2.8%.
In his usual discursive line, Fed Chairman Jerome Powell commented that “there is no need to be in a hurry” to reduce interest rates and, according to Banca March experts, he emphasized the resilience of the U.S. economy and the strength of the labor market as key factors to give the monetary authority more time to make the first move.
Since the start of the year, gold has accumulated a revaluation of almost 10%, although the progress was particularly concentrated during the month of March which just ended – with a rise of 9% – in its statements and movements by central banks regarding the timing and intensity of the arrival of interest rates.
In this sense, gold broke its historical records several times in March, approaching and finally surpassing the level of 2,200 dollars; a trend that now continues into early April.
In a report published on Monday, Matthew Michael, chief investment officer of Schroders, drew attention to the “significant” fact that gold prices have ignored rising real interest rates. “We appear to have entered an era of deglobalization and geopolitical bifurcation that has significantly strengthened gold’s role as a reserve asset,” Mr. Michael noted as a new paradigm for the price of gold.
The upward movements of the ounce of gold in recent weeks have surprised the market following the whirlwind of central bank meetings – the vast majority of which left rates unchanged – particularly in the wake of the meeting of the Fed.
Indeed, the price of gold being fixed in dollars, if the “price of money” (interest rates) remains high, the price of the metal should devalue and vice versa, according to classical theory.
In this sense, Yves Bonzon, chief investment officer of Julius Baer, underlined a fortnight ago the difficulty of explaining the current strength of gold, because none of the traditional drivers of the gold price – the US dollar, real US bond yields and investor risk aversion – is currently in place.
As a result, he noted that real investment demand for gold, as reflected in the holding of physically collateralized investment products, has not kept pace with rising prices, suggesting that “the Speculative positioning in the futures market is pushing prices higher, thus calling into question the sustainability of the current episode.
The price of gold has recovered strongly with the return to the forefront of the Israeli-Palestinian conflict, the metal having increased by more than 20% since October 7, the day of the attack by the Islamist militia Hamas on the territory Israeli.
Thus, driven by geopolitical risks and massive purchases by central banks, gold reached a new historic record at more than $2,100 at the beginning of December.
Before this bullish move last fall, the last time gold traded above $2,000 was in May 2023, due to tensions in the Ukraine conflict and the fallout from the crisis American regional bank, as well as the bankruptcy of Credit Suisse last March, so that its value reached $2,063 at the beginning of May.
However, the previous all-time high for gold – before December 2023 – dates back to March 7, 2022, when the ounce reached $2,075, due to the start of the Russian invasion of Ukraine two weeks earlier. It also came close to these levels in August 2020, after the outbreak of the pandemic.