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Overnight gold stunned markets by obliterating resistance levels and rocketing up to a new all-time high of $2,148.99. 

As well as a new level we might also have seen a new standard in volatility being set as the yellow metal experienced $100 intraday swings. 

This morning gold has calmed itself down a bit. But make no mistake, we are in a new era for the gold price. 

What drove it so high? As always, it’s rarely down to one reason. Gold has had a stellar year due to a confluence of factors. And the reasons for last night’s pop are really no different. 

• The US Dollar’s 3.5% fall since November has given non-USD buyers the upper hand when it comes to gold purchases. 
• No one should be surprised that gold climbs when there are wars raging. It’s probably the oldest reason in the book for buying gold. When there is geopolitical uncertainty citizens, investors and central banks alike put their financial allegiance into gold. This year, with Ukraine and the Middle East showing little let-up, the reason to hold gold is stronger than ever. 
• And many might point to the Russian sanctions as to why gold has become popular amongst central banks, but data quite clearly shows that demand was strong prior to Russia’s invasion of Ukraine. This is down to countries slowly turning away from US dollar reliance and instead to an independent currency, such as gold.
• Finally (a less fun one to explain) gold has also been given room to perform thanks to the drop in real rates which have dropped by 50 basis points since the peak in October. Markets are now pricing in up to 4 cuts from The Fed next year. Will other Central Banks be far behind?

At the time of writing gold is now back down around $2,067, so did gold run ahead of itself, given it’s now backed off from its all-time high? Perhaps, but the move did happen during a low liquidity trading session which gives it more capacity for bigger swings.

However, the tone has now been set for what we can expect from gold. Given much of its performance this year has been despite the lack of ETF buying, we expect to see an even stronger, more sustained performance when investors turn back to ETFs; something we believe is inevitable given the growing sentiment around owning the yellow metal. 

So whilst many might have seen the price this morning and wondered if they’ve missed the boat we would argue the boat is very much still in the dock but be prepared for some choppy months ahead. 

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