The price of gold has risen by over 17% since the beginning of the year, making it one of the best-performing assets this year. After hovering between US$1,800 and US$2,000 in 2023, the price of gold surged in March and April 2024, rapidly reaching US$2,400.
An increase in an unfavorable macro context
This performance is widely commented on. Historic in its scale and speed of movement, it is above all completely at odds with the historically observed relationship between gold and other asset classes. Gold’s rise came at a time when real interest rates were rising, the US dollar was strengthening and risky assets were continuing their ascent at the start of the year.
The link between real interest rates and gold has been broken since the beginning of 2022. Historically, the price of gold has been inversely correlated with changes in US real interest rates, and this relationship has worked very well since at least 2006. From a fundamental point of view, this is due to the fact that, as gold is a real asset that does not generate a return, it is all the more expensive to hold as positive real rates rise.
