Gold seems to be sparking more attention these days, as investors have seen the precious metal steadily rise from its December low of around $1,200, to a new high of $1,350 just three months later.
What’s Driving Gold?
The media has been focusing on the conflict in Ukraine and Russia as the main driver for gold, but I think an equally important driver relates to real interest rates.
For gold, the real fuel lies in negative-to-low real rates of return. Historically, the gold price rises when the inflationary rate (CPI) is greater than the current interest rate. Similarly, when real interest rates go above the positive 2-percent mark, you can expect the gold price to drop.