Gold has always held a special place as the ultimate store of value. This year, the price of spot gold exploded to a record high of $3,433.55 per ounce, the highest since 1978. Over the past 12 months, gold delivered a stunning 41.8 percent return, outpacing global stocks (12.2%), bonds (6.5%) and commodities (2.4%).
But how long can the rally last? Volatility in gold is no joke. The standard deviation of the LBMA price hit 15.0% over the past yearâalmost on par with stocks (15.6%) and above other commodities (13.5%). Novice traders or those using leverage can face sharp losses alongside the gains.
Money supply and rates at work Low leading rates by the Federal Reserve Bank, the European Central Bank and Japanese Central Bank fueled liquidity. Between January 2020 and 2022, gold climbed 18.6% as rates dropped to near zero or below. When inflation surged to two-decade highs from 2022 through 2024, gold jumped another 42.8% in response, with geopolitical tensions adding extra momentum.
Reading the signals Future moves by central banks will matter most. If real interest rates stay negative, gold may continue its ascent. If rate cuts end and yields turn positive, the rally could stall. Layer in shifts in the US dollar and global risks, and the path forward becomes a high-stakes balancing act.
For young global investors, adding gold in moderation can offer a safe haven while still embracing growth assets like stocks and bonds. Smart diversification and a clear view of risk could help portfolios shine without getting burned.
Reference(s):
cgtn.com
