Gold Rush

Gold Rush

             Gold has been on a rally the past 2 years and has more than doubled over that time. From the beginning of 2024 through now, gold has gone from $2,000 per ounce to over $5,000 per ounce. This seems to be a fundamental rally in gold and not simply a cyclical bubble.

             There are many underlying causes of the rally in gold. Some point to central banks buying more of it. Others point to inflation concerns and devaluation of fiat currencies around the world. Other justifications that I don’t think are as valid include geopolitical turmoil, a weakening dollar, ETF flows, and the impact of stable coins. These last few don’t pass my sniff test like the first several. They could have some impact in the price of gold, but those would all be much smaller effects. Gold has traditionally gained value when fiat currencies lose public trust. This could be some of the cause now, but that doesn’t appear to be the entire cause. This rise in the price of gold seems to be more fundamental than fear driven.

Even if this gold price increase is due to fundamental value improvement for gold, that doesn’t mean that the current price could not drop well below $5,000 for an equally valid reason at some point in the near future. When you look at a chart of the historical price of gold, it seems that the correct fundamental price should be somewhere between $3,000 and $4,000 per ounce.  Don’t hold me to that, but that is just a quick guess from the pricing history. We will just have to wait and see how long this Gold Rush lasts.