Less than a week after breaking through the $2,900 per ounce barrier, gold has surpassed $3,000 per ounce, driven mainly by growing economic uncertainty.
The S&P 500 has entered correction territory, falling more than 10 percent from its recent highs as fears of a slowdown grip the markets, with persistent inflation and sluggish growth fueling fears of stagflation.
Trade tensions have risen again, with highly vacillating tariff threats (including a 200 percent tariff on European wines and spirits) fueling uncertainty and shaking global supply chains.
Meanwhile, the growing rift in political and military ties between the United States and Europe has exacerbated market instability, as diplomatic fractures raise concerns about the future of transatlantic cooperation. Against a backdrop of turbulence, investors are once again flocking to gold as the ultimate safe-haven asset, driving prices to record highs.
For 5,000 years, gold has been the cornerstone of economic trade, a constant in the ever-shifting sands of monetary history.
Era after era, it has been dismissed as an obsolete relic, denigrated by policymakers, marginalized by financial engineers and declared obsolete by the architects of fiat money, only to re-emerge with a quiet, unshakable resilience when men's grand designs collapse under their own weight.
Time and again its eulogies have been written, its relevance has been declared dead, but today it is back at the center of the monetary and fiscal universe, not by decree, but by the sheer gravity of economic reality.
Central banks, which once shunned gold, are now buying it at an unprecedented rate, seeking refuge in the very systems they helped create.
Since the Biden administration crossed the proverbial Rubicon, using the ubiquity of the U.S. dollar as a geopolitical weapon, nations around the world have been forced to recognize the danger of dollar dependence and shift their reserves into the one asset that history has never betrayed.
Gold, indifferent to ideology and immune to the arrogance of policymakers, is regaining its throne, not with fanfare, but with the silence of a gravitational presence that has never really gone away.
Gold's boom over the decades has been closely tied to economic crises, inflationary pressures and geopolitical instability. Gold first surpassed $500 per ounce in December 1979, as investors sought refuge in safe-haven assets.
The 1970s were marked by stagflation, an oil crisis and a weakening U.S. dollar, exacerbated by the collapse of the Bretton Woods system in 1971. Inflation in the United States had exceeded 13 percent, while geopolitical events such as the Iranian Revolution and the Soviet invasion of Afghanistan contributed to economic uncertainty.
These factors fueled fears of currency devaluation, which caused gold prices to rise. By the end of 1979, the metal had become the preferred hedge against inflation and instability.
Gold remained below $1,000 an ounce for nearly three decades until March 2008, when the global financial crisis drove investors to seek safe-haven assets.
The collapse of major financial institutions such as Bear Stearns and the mortgage crisis led to a severe credit crunch and widespread fear of the collapse of the banking system. As the Federal Reserve and other central banks responded with massive injections of liquidity and interest rate cuts, investors turned to gold as a hedge against financial instability. The metal surpassed $1,000 per ounce on March 13, 2008, as concerns grew about the sustainability of the global financial system.
Just a few years later, in April 2011, the gold price surpassed $1,500 per ounce, as the aftermath of the financial crisis turned into the European sovereign debt crisis. Countries such as Greece, Portugal and Ireland were facing potential defaults, raising doubts about the stability of the Eurozone. At the same time, the United States was dealing with its own fiscal problems, including a credit downgrade by Standard & Poor's in August 2011, which further reinforced gold's role as a hedge against currency and financial turbulence.
The next major milestone came in August 2020, when gold surpassed $2,000 per ounce amid the COVID-19 pandemic. The global economy was upended by confiscations, company closures and widespread unemployment, which forced governments to implement unprecedented stimulus measures, including trillion-dollar aid packages and near-zero interest rates. These measures devalued currencies and generated inflationary fears, driving gold to an all-time high of $2,075 per ounce.
Faced with resurgent inflationary pressures in August 2024, the gold price surpassed $2500 per ounce, further fueled by rising geopolitical tensions, persistent inflation and concerns about a weakening U.S. dollar. A combination of central bank buying, trade conflicts and changes in global monetary policies contributed to further price increases.
And now, gold has reached an all-time high of $3,000 per ounce, reflecting continued uncertainty in global markets. Factors such as renewed gold buying by central banks, dollar depreciation, tariffs and global economic instability have cemented, or rather reminded us of, gold's role as the best protection against financial turbulence.
From this point, gold could continue to rise, fall to $2,000 an ounce or hover around its new all-time high before establishing a clearer directional bias as political and economic trends develop.
What is certain, however, is that gold has consistently met the rare set of criteria that make it the soundest form of money (according to the market as experienced in real life) in human history. And just as certainly, that truth will continue to be challenged, dismissed, and ultimately reconfirmed, as long as ambitious and power-hungry individuals attempt to manipulate the systems in which it operates. Reality will inevitably prove them wrong, yet again.
Peter C. Earle, Money Metals