Gold Hits Record High on Renewed Safe-Haven Demand
Central bank buying and hedging against currency weakness have pushed bullion to an all-time high, even as real yields remain elevated.
Tom Hartley
Personal Finance Editor
Spot gold climbed to an all-time high this week, extending a rally that has defied the usual playbook in which higher real interest rates weigh on non-yielding assets like bullion. Traders point instead to a combination of central bank buying, currency hedging and geopolitical caution.
Central banks, particularly in emerging markets, have been net purchasers of gold for a fourth consecutive year as part of a broader push to diversify reserves away from a small number of major currencies. That structural demand has provided a floor under prices even during periods when Western investment flows have been muted.
Exchange-traded fund holdings of gold have also started to tick higher after several years of outflows, suggesting Western retail and institutional investors are beginning to add exposure again. Analysts describe the move as a hedge against both currency volatility and the possibility of renewed inflation pressure.
Mining stocks have lagged the move in the metal itself, a pattern common in the early stages of a gold rally before producers' margins catch up with higher realised prices.