"Gold has cemented itself as a safe-haven asset, viewed as a life vest in time of choppy market waters. Since the initial rate hike in 2022, the price of gold has skyrocketed, increasing by more than 150% to hit a record-breaking $5,000 per troy ounce last month. Investors like Bridgewater Associates' Ray Dalio have advocated for 15% of one's portfolio to be allocated toward gold amid crescendoing geopolitical tensions and mounting U.S. debt."
"Citing data from Bloomberg and Macrobond, Slok notes that prior to early 2022 when the Fed began hiking rates to curb post-pandemic inflation that peaked around 9%, the price of gold and interest rates were inversely correlated. But after the Fed's 2022 hikes, this was no longer the case. Instead of gold prices falling, which would follow the pattern of previous rate hikes, they instead remained resilient. As the Fed held rates steady, gold prices continued to climb."
The historical inverse correlation between gold prices and real interest rates broke down after the Federal Reserve began raising rates in 2022. Prior to early 2022, higher real rates typically pushed gold prices lower. After the 2022 rate hikes, gold prices remained resilient and climbed even as rates rose or held steady. Gold rose more than 150% and reached a record $5,000 per troy ounce. The decoupling of gold from its traditional relationship with real rates reflects investor unease about returns in traditional assets and increased demand for alternative safe-haven allocations.
Read at Fortune
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