Gold prices are up 2.1% to $2,042 per ounce, just 1.5% below the record high of $2,069.40 set in 2020, according to an article in Barron’s. That’s a gain of 12% in the last month alone, and 25% from the low it hit last November.
There are generally three factors that drive the price of gold: a decline in the dollar, lower bond yields, and increased risk aversion. Gold currently has the advantage of all three of those factors. As bond yields fall in the U.S.—the 2-year note yield was 3.8% this week, down from 5.1% in early March—they’ve maintained higher yields overseas, pushing the dollar down. And as more investors expect that the Fed will pivot on their tightening policies in order to avoid a banking crisis, and therefore send the economy into a recession before year’s end, they are seeking safety in the refuge of gold, the article contends. Though the Fed’s actions and resulting market turmoil will determine gold’s next move, with bond yields, positive investor sentiment, and the dollar all acting as tailwinds, gold prices could go still higher.
It’s also good news for companies that produce and sell gold; Newmont and the VanEck Gold Miners ETF have both rallied 20% and 28%, respectively. And while mining expenses have gone up significantly in the wake of raging inflation, higher prices for the commodity itself will help offset those expensive costs. As gold prices go up, gold-mining stocks, which tend to be more volatile than the metal itself, will be well-positioned to reap the rewards, the article concludes.