The value of gold set a latest all-time high on Tuesday, propelling the price of a single gold bar to over $1 million for the primary time.
The dear metal hit $2,528 per troy ounce, surging past the previous record of $2,474 established on Aug. 2, 2024.
With the common gold bar weighing 400 ounces, that now brings the worth of an ingot to $1,011,200.
Why gold prices are rising
Historically, the price of gold is negatively correlated with rates of interest. When rates are lower, gold prices are inclined to go higher.
That’s certainly one of the first catalysts behind Tuesday’s record high, because the Federal Reserve is forecast to chop its effective federal funds rate (EFFR) at each of the three remaining Federal Open Market Committee (FOMC) meetings this 12 months.
July’s Consumer Price Index print was under 3% for the primary time in over three years, which should serve because the determining factor for the Fed to enact its rate-cutting policy. In response to the CME Group’s FedWatch Tool, there may be now a 100% likelihood of cuts to the EFFR occurring through the September, November and December FOMC meetings.
One other contributing factor to gold’s all-time high price is increased volatility within the stock market. Although the most important market indices have already recovered from the sell-off and subsequent pullback that began in late July, analysts expect turbulence to persist for the rest of the summer and into the ultimate months of 2024.
The Chicago Board Options Exchange’s CBOE Volatility Index reached a crescendo earlier in August, registering a year-to-date high of 38.57. Gold, which has long been considered a safe-haven asset, advantages from negative investor sentiment within the equity markets, which is usually fueled by volatility.
In other words, when investors are jittery about stocks, they have a tendency to place extra money into gold, which drives prices higher.
Gold’s performance vs. stocks
To this point this 12 months, the premier precious metal has outperformed stocks. Despite the S&P 500 having gained a sturdy 18%, the worth of gold has risen 22.7% in 2024. For context, that is essentially the most dramatic rise in gold prices because the pandemic resulted within the metal gaining 25% between March 2020 and August 2020.
Nonetheless, while the outlook for the stock market stays strong, pinning the worth performance of gold is less precise. Stocks are expected to achieve momentum heading into fall on the back of three expected rate cuts by the Fed.
Those exact same rate cuts, along with other aspects — including the U.S. presidential election, geopolitical unrest within the Middle East and ongoing fears of a recession — could fuel further gains for gold. But the reality is not any one really knows where gold prices (or stock prices for that matter) are heading.
All the time keep in mind that gold is another asset, and it’s advisable to commit not more than 10% of your portfolio to the speculative investment.
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